THE PUBLIC WORKS EMPLOYMENT ACT OF 1977

In May 1977, Congress enacted the Public Works Employment Act of 1977.  The act authorized $4 billion for federal grants to state and local governmental entities for use in local public works projects.   One feature of the act was a "minority business enterprise" or "MBE" provision, that  stated: 

"no grant shall be made under this Act for any local public works project unless the applicant gives satisfactory assurance . . . that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises.  For purposes of this paragraph, the term ‘minority business enterprise’ means a business at least 50 per centum of which is owned by minority group members or, in case of a publicly owned business, at least 51 per centum of the stock of which is owned by minority group members.  For the purposes of the preceding sentence, minority group members are citizens of the United States who are Negroes, Spanish-speaking,  Orientals, Indians, Eskimos, and Aleuts."

The implementing regulations provided for a waiver to the 10 per cent requirement if it was not possible due to a lack of available minority business enterprises located in a project area. 

During consideration of the ac tIn the U. S. Congress, the sponsor said that the objective

"was to direct funds into the minority business community, a sector of the economy sorely in need of economic stimulus but which, on the basis of past experience with Government procurement programs, could not be expected to benefit significantly from the public works program as then formulated."

For fiscal year 1976, the sponsor noted that less than 1% of all federal procurement was with minority business enterprises although minorities comprised 15-18% of the population.  The provision was put forward not as a new concept, but rather one building upon prior administrative practice such as the Section  8(a) program of the Small Business Act.  In 1977, the House Committee on Small Business did a lengthy report on the 8(a) program.  In the report, the Committee said that the effects of past inequities stemming from racial prejudice have not remained in the past.  As evidence, the report said that

"While minority persons comprise about 16 percent of the Nation’s population, of the 13 million businesses in the United States, only 382,000, or approximately 3.0 percent, are owned by minority individuals.  The most recent data from the Department of Commerce also indicates that the gross receipts of all businesses in this country totals about $2,540.8 billion, and of this amount only $16.6 billion, or about 0.65 percent was realized by minority business concerns."

Additional reports found that minority businesses had difficulty gaining entrance to federal contracting.  For example, the Civil Rights Commission found that there were barriers encountered by minority businesses in gaining access to government contracting opportunities at the federal, state, and local levels.  Congress felt that a 10 per cent MBE participation requirement, subject to administrative waiver, was required to assure minority business participation; otherwise, it was thought that repetition of the prior experience could be expected, with participation by minority business accounting for an inordinately small percentage of government contracting.

THE ISSUE

Did the Public Works Employment Act of 1977 violate the equal protection component of the Due Process Clause of the Fifth Amendment.

THE JUDGMENT

The MBE provision of the Public Works Employment Act of 1977 did not violate the Constitution.

THE OPINIONS

The judgment was supported by six justices with opinions that can be placed in four areas.  Chief Justice Burger and Justice White appeared to have been discussing the application of strict scrutiny without naming it.  Justice Powell agreed with their opinion and added a separate opinion in which he specifically applied strict scrutiny.  Justices Marshall, Brennan, and Blackmun, in a separate opinion, applied the intermediate scrutiny standard from Bakke.   On the other hand, justices Stewart and Rehnquist, in a separate opinion, equated the decision to that in Plessy v. Ferguson while Justice Stevens, in a separate opinion, concluded that the program was not narrowly tailored. 

Chief Justice Burger announced the judgment of the Court and delivered an opinion, in which Justices White and Powell joined.

Standard of Scrutiny To Apply

The Justices explained their views about reviewing the work of the U. S. Congress and said

"When we are required to pass on the constitutionality of an Act of Congress, we assume 'the gravest and most delicate duty that this Court is called on to perform.' Blodgett v. Holden, 275 U.S. 142, 148 (1927) (opinion of Holmes, J.).  A program that employs racial or ethnic criteria, even in a remedial context, calls for close examination; yet we are bound to approach our task with appropriate deference to the Congress, a coequal branch charged by the Constitution with the power to 'provide for the . . . general Welfare of the United States' and 'to enforce, by appropriate legislation,' the equal protection guarantees of the Fourteenth Amendment. Art. I, § 8, cl. 1; Amdt. 14, § 5."  

"Here we pass, not on a choice made by a single judge or a school board, but on a considered decision of the Congress and the President."

The Justices proceeded with their analysis in two steps.  First, they asked whether the objective of the legislation was within the powers of the U. S. Congress.  They noted that Congress often used its “Spending Power” to advance its policy objectives and that the Court repeatedly upheld this power.  After an analysis, the Justices concluded that Congress has the power to advance its policy through its Spending Power.

Second, they noted that Congress may employ racial or ethnic classifications only if those classifications do not violate the equal protection component of the Due Process Clause of the Fifth Amendment.  They recognized the need for

"careful judicial evaluation to assure that any congressional program that employs racial or ethnic criteria to accomplish the objective of remedying the present effects of past discrimination is narrowly tailored to the achievement of that goal."

They stressed "the limited scope" of their inquiry because they were not dealing 

"with the limited remedial powers of a federal court, for example, but with the broad remedial powers of Congress.  It is fundamental that in no organ of government, state or federal, does there repose a more comprehensive remedial power than in the Congress, expressly charged by the Constitution with competence and authority to enforce equal protection guarantees.  Congress not only may induce voluntary action to assure compliance with existing federal statutory or constitutional antidiscrimination provisions, but also where Congress has authority to declare certain conduct unlawful, it may, as here, authorize and induce state action to avoid such conduct."

However, the Justices noted

"For its part, the Congress must proceed only with programs narrowly tailored to achieve its objectives, subject to continuing evaluation and reassessment; administration of the programs must be vigilant and flexible; and, when such a program comes under judicial review, courts must be satisfied that the legislative objectives and projected administration give reasonable assurance that the program will function within constitutional limitations."

Finally the Justices explained

"Any preference based on racial or ethnic criteria must necessarily receive a most searching examination to make sure that it does not conflict with constitutional guarantees.  This case is one which requires, and which has received, that kind of examination.  This opinion does not adopt, either expressly or implicitly, the formulas of analysis articulated in such cases as University of California Regents v. Bakke, 438 U.S. 265 (1978).  However, our analysis demonstrates that the MBE provision would survive judicial review under either 'test' articulated in the several Bakke opinions.  The MBE provision of the Public Works Employment Act of 1977 does not violate the Constitution."

Government Objective

The Justices concluded that Congress had an abundant amount of evidence for it to find that minority businesses had been denied effective participation in public contracting opportunities by procurement practices that perpetuated the effects of prior discrimination at the federal, state, and local level.  The MBE program was a remedial program and that Congress could consider race in formulating a remedy for past discrimination.

Narrow Tailoring

In their review, the justices looked at the burden placed on non-minority firms and whether the program covered individuals that had suffered from past discrimination.

Sharing the Burden

The Justices considered the burden the MBE program would place on non-minority businesses and noted that the program may disappoint the expectations of non-minority.  However, they said that a limited and properly tailored remedy to cure the effects of prior discrimination would permit a sharing of the burden by non-minority firms.  The actual burden shouldered by the non-minority firms was considered to be relatively light in comparison to the overall size of the funded program.  The Justices concluded that it was “not a constitutional defect in this program that it may disappoint the expectations of non-minority firms.”

Under-inclusive

The Justices also evaluated the MBE program in regard to whether it was under-inclusive—one that "limits its benefit to specified minority groups, rather than extending its remedial objectives to all businesses whose access to government contracting is impaired by the effects of disadvantage or discrimination."  The Justices said that Congress did not seek to give select minority groups a preferred standing in the construction industry.  Rather it embarked on a remedial program to place them on a more equitable footing with respect to public contracting opportunities.  The Court did not find Congress practicing any objectionable discrimination by excluding from coverage any identifiable minority group that had been the victim of a degree of disadvantage and discrimination equal to or greater than that suffered by the groups encompassed by the MBE program.

Over-inclusive

The Justices also determined whether the MBE program was over-inclusive—one that “bestows a benefit on businesses identified by racial or ethnic criteria which cannot be justified on the basis of competitive criteria or as a remedy for the present effects of identified prior discrimination.”  To make this determination, the Justices pointed out the program’s waiver provision and its process for identifying “bona fide” participants.  The Justices concluded

"That the use of racial and ethnic criteria is premised on assumptions rebuttable in the administrative process gives reasonable assurance that application of the MBE program will be limited to accomplishing the remedial objectives contemplated by Congress, and that misapplications of the racial and ethnic criteria can be remedied."

Additional Concurring Opinions

Justice Powell

Justice Powell concurred in the opinion and added a separate opinion. 

Standard of Scrutiny To Apply

Justice Powell said he would place greater emphasis than the Chief Justice to articulate judicial standards of review in conventional terms and added a separate opinion to apply the standard that he outlined in his Bakke opinion 438 U.S. 265.  He also explained that "Under this Court's established doctrine, a racial classification is suspect and subject to strict judicial scrutiny."  He further explained, that 

"In the past, this 'means' test has been virtually impossible to satisfy.  Only two of this Court's modern cases have held the use of racial classifications to be constitutional.  See Korematsu v. United States, 323 U.S. 214 (1944); Hirabayashi v. United States, 320 U.S. 81 (1943).  Indeed, the failure of legislative action to survive strict scrutiny has led some to wonder whether our review of racial classifications has been strict in theory, but fatal in fact."

Turning to the present case, he said the MBE provision is "constitutionally prohibited unless it is a necessary means of advancing a compelling governmental interest."

Additionally, he explained 

"The Equal Protection Clause, and the equal protection component of the Due Process Clause of the Fifth Amendment, demand that any governmental distinction among groups must be justifiable.  Different standards of review applied to different sorts of classifications simply illustrate the principle that some classifications are less likely to be legitimate than others.  Racial classifications must be assessed under the most stringent level of review, because immutable characteristics, which bear no relation to individual merit or need, are irrelevant to almost every governmental decision.  See, e.g., Anderson v. Martin, 375 U.S. 399, 402-404 (1964).  In this case, however, I believe that § 103(f)(2) is justified as a remedy that serves the compelling governmental interest in eradicating the continuing effects of past discrimination identified by Congress."

Compelling Interest

Justice Powell concluded that Congress "reasonably concluded that private and governmental discrimination had contributed to the negligible percentage of public contracts awarded minority contractors" and therefore had a compelling interest in correcting the problem.  He spent a good portion of his opinion on the power and role of the U. S. Congress.  He explained that

"Because the distinction between permissible remedial action and impermissible racial preference rests on the existence of a constitutional or statutory violation, the legitimate interest in creating a race-conscious remedy is not compelling unless an appropriate governmental authority has found that such a violation has occurred.  In other words, two requirements must be met. First, the governmental body that attempts to impose a race-conscious remedy must have the authority to act in response to identified discrimination. Cf. Hampton v. Mow Sun Wong, 426 U.S. 88 , 103 (1976). Second, the governmental body must make findings that demonstrate the existence of illegal discrimination. In Bakke, the Regents failed both requirements.  They were entrusted only with educational functions, and they made no findings of past discrimination.  Thus, no compelling governmental interest was present to justify the use of a racial quota in medical school admissions. Bakke, supra at 309-310."

"The history of this Court's review of congressional action demonstrates beyond question that the National Legislature is competent to find constitutional and statutory violations. Unlike the Regents of the University of California, Congress properly may -- and indeed must -- address directly the problems of discrimination in our society. See Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 , 257 (1964)."

"It is beyond question, therefore, that Congress has the authority to identify unlawful discriminatory practices, to prohibit those practices, and to prescribe remedies to eradicate their continuing effects."

"Congress is not an adjudicatory body called upon to resolve specific disputes between competing adversaries.  Its constitutional role is to be representative, rather than impartial, to make policy, rather than to apply settled principles of law.  The petitioners' contention that this Court should treat the debates on § 103(f)(2) as the complete 'record' of congressional decisionmaking underlying that statute is essentially a plea that we treat Congress as if it were a lower federal court.  But Congress is not expected to act as though it were duty bound to find facts and make conclusions of law.  The creation of national rules for the governance of our society simply does not entail the same concept of recordmaking that is appropriate to a judicial or administrative proceeding.  Congress has no responsibility to confine its vision to the facts and evidence adduced by particular parties.  Instead, its special attribute as a legislative body lies in its broader mission to investigate and consider all facts and opinions that may be relevant to the resolution of an issue. One appropriate source is the information and expertise that Congress acquires in the consideration and enactment of earlier legislation.  After Congress has legislated repeatedly in an area of national concern, its Members gain experience that may reduce the need for fresh hearings or prolonged debate when Congress again considers action in that area."

"Acceptance of petitioners' argument would force Congress to make specific factual findings with respect to each legislative action.  Such a requirement would mark an unprecedented imposition of adjudicatory procedures upon a coordinate branch of Government.  Neither the Constitution nor our democratic tradition warrants such a constraint on the legislative process.  I therefore conclude that we are not confined in this case to an examination of the legislative history of § 103(f)(2) alone.  Rather, we properly may examine the total contemporary record of congressional action dealing with the problems of racial discrimination against minority business enterprises."

Narrow Tailoring

Justice Powell provided an outline of issues to be reviewed in a "narrow tailoring" review by stating

"Courts reviewing the proper scope of race-conscious hiring remedies have considered (i) the efficacy of alternative remedies, NAACP v. Allen, 493 F.2d 614, 619 (CA5 1974); Vulcan Society Inc. v. Civil Service Comm'n, 490 F.2d 387, 398 (CA2 1973), (ii) the planned duration of the remedy, id. at 399; United States v Wood, Wire & Metal Lathers Local 6, 471 F.2d 408, 414, n. 12 (CA2), cert. denied, 412 U.S. 939 (1973), (iii) the relationship between the percentage of minority workers to be employed and the percentage of minority group members in the relevant population or workforce, Association Against Discrimination v. Bridgeport, 594 F.2d 306, 311 (CA2 1979); Boston Chapter NAACP v. Beecher, 504 F.2d 1017, 1026-1027 (CA1 1974), cert. denied, 421 U.S. 910 (1975); Bridgeport Guardians, Inc. v. Bridgeport Civil Service Comm'n, 482 F.2d 1333, 1341 (CA2 1973) cert. denied, 421 U.S. 991 (1975); Carter v. Gallagher, 452 F.2d 315, 331 (CA8) (en banc), cert. denied, 406 U.S. 950 (1972), and (iv) the availability of waiver provisions if the hiring plan could not be met, Associated General Contractors, Inc. v. Altshuler, 490 F.2d 9, 18-19 (CA1 1973), cert. denied, 416 U.S. 957 (1974)."

After providing an outline, Justice Powell provided his answers as follows

• alternative remedies - Congress knew other "remedies had failed to ameliorate the effects of racial discrimination in the construction industry."
  
  
• duration of remedy - "As soon as the Public Works Employment Act of 1977 ends, "this set-aside program ends."  "The temporary nature of this remedy ensures that a race-conscious program will not last longer than the discriminatory effects. it is designed to eliminate."
  
  
• Percentage goal - "The choice of a 10% set-aside thus falls roughly halfway between the present percentage of minority contractors and the percentage of minority group members in the Nation."
  
  
• Waiver provisions or flexibility - The program's waiver provision was stated as "The factors governing issuance of a waiver include the availability of qualified minority contractors in a particular geographic area, the size of the locale's minority population, and the efforts made to find minority contractors."

Finally, Justice Powell explained that "A race-conscious remedy should not be approved without consideration of an additional crucial factor - the effect of the set-aside upon innocent third parties."  Justice Powell, noted that the 

"the set-aside would reserve about 0.25% of all the funds expended yearly on construction work in the United States for approximately 4% of the Nation's contractors who are members of a minority group.  The set-aside would have no effect on the ability of the remaining 96% of contractors to compete for 99.75% of construction funds.  In my view, the effect of the set-aside is limited, and so widely dispersed that its use is consistent with fundamental fairness."  

Justice Powell then concluded that 

"When Congress acts to remedy identified discrimination, it may exercise discretion in choosing a remedy that is reasonably necessary to accomplish its purpose.  Whatever the exact breadth of that discretion, I believe that it encompasses the selection of the set-aside in this case."

Justice Marshall

Justice Marshall concurring in the judgment was joined by Justices Brennan and Blackmun.

Standard of Scrutiny To Apply

Justice Marshall applied the standard of review that he used in Bakke.  Under that standard of review,

“the proper inquiry is whether racial classifications designed to further remedial purposes serve important governmental objectives and are substantially related to achievement of those objectives.”

"In my view, the 10% minority set-aside provision of the Public Works Employment Act of 1977 passes constitutional muster under the standard announced in that opinion."

Dissenting Opinions

Justice Stewart issued a dissenting opinion that was joined by Justice Rehnquist.

In their opening remark, the Justices compared the decision to the decision in Plessy v. Ferguson.  Additionally, they stated that

"The equal protection standard of the Constitution has one clear and central meaning -- it absolutely prohibits invidious discrimination by government.  That standard must be met by every State under the Equal Protection Clause of the Fourteenth Amendment. Loving v. Virginia, 388 U.S. 1, 10; Hill v. Texas, 316 U.S. 400; Strauder v. West Virginia, 100 U.S. 303 , 307-308; Slaughter-House Cases, 16 Wall. 36, 71-72.  And that standard must be met by the United States itself under the Due Process Clause of the Fifth Amendment. Washington v. Davis, 426 U.S. 229, 239; Bolling v. Sharpe, 347 U.S. 497.   Under our Constitution, any official action that treats a person differently on account of his race or ethnic origin is inherently suspect, and presumptively invalid. McLaughlin v. Florida, 379 U.S. 184, 192; Bolling v. Sharpe, supra at 499; Korematsu v. United States, 323 U.S. 214, 216."

"Today, the Court upholds a statute that accords a preference to citizens who are "Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts," for much the same reasons.  I think today's decision is wrong for the same reason that Plessy v. Ferguson was wrong, and I respectfully dissent."

“Under our Constitution, the government may never act to the detriment of a person solely because of that person's race.  The color of a person's skin and the country of his origin are immutable facts that bear no relation to ability, disadvantage, moral culpability, or any other characteristics of constitutionally permissible interest to government.”

“The Court's attempt to characterize the law as a proper remedial measure to counteract the effects of past or present racial discrimination is remarkably unconvincing.  The Legislative Branch of government is not a court of equity.  It has neither the dispassionate objectivity nor the flexibility that are needed to mold a race-conscious remedy around the single objective of eliminating the effects of past or present discrimination."

"But even assuming that Congress has the power, under § 5 of the Fourteenth Amendment or some other constitutional provision, to remedy previous illegal racial discrimination, there is no evidence that Congress has, in the past, engaged in racial discrimination in its disbursement of federal contracting funds.  The MBE provision thus pushes the limits of any such justification far beyond the equal protection standard of the Constitution.  Certainly, nothing in the Constitution gives Congress any greater authority to impose detriments on the basis of race than is afforded the Judicial Branch.  And a judicial decree that imposes burdens on the basis of race can be upheld only where its sole purpose is to eradicate the actual effects of illegal race discrimination.  See Pasadena City Board of Education v. Spangler, 427 U.S. 424."

Justice Stevens

Justice Stevens expressed concern about creating "monopoly privileges in a $400 million market for a class of investors defined solely by racial characteristics."  He then looked at the specific class created by the legislation and said.  

"The statutory definition of the preferred class includes "citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts."  All aliens and all nonmembers of the racial class are excluded.  No economic, social, geographical, or historical criteria are relevant for exclusion or inclusion.  There is not one word in the remainder of the Act or in the legislative history that explains why any Congressman or Senator favored this particular definition over any other or that identifies the common characteristics that every member of the preferred class was believed to share.  Nor does the Act or its history explain why 10% of the total appropriation was the proper amount to set aside for investors in each of the six racial subclasses."

Justice Stevens then identified four justifications for the racial classification included in the Act.  Following are the four justifications he noted and his discussion on each of them.

(1)  "that the 10% set-aside is a form of reparation for past injuries to the entire membership of the class."

• "if Congress is to authorize a recovery for a class of similarly situated victims of a past wrong, it has an obligation to distribute that recovery among the members of the injured class in an evenhanded way."  Delaware Tribal Business Committee v. Weeks, 430 U.S. 73.  "Moreover, in such a case, the amount of the award should bear some rational relationship to the extent of the harm it is intended to cure."  "Quite obviously, the history of discrimination against. black citizens in America cannot justify a grant of privileges to Eskimos or Indians."  "There is no reason to assume, and nothing in the legislative history suggests, much less demonstrates, that each of the subclasses is equally entitled to reparations from the United States Government."  "At best, the statutory preference is a somewhat perverse form of reparation for the members of the injured classes. For those who are the most disadvantaged within each class are the least likely to receive any benefit from the special privilege even though they are the persons most likely still to be suffering the consequences of the past wrong."  

(2)  "that it is an appropriate remedy for past discrimination against minority business enterprises that have been denied access to public contracts."

• "The legislative history of the Act does not tell us when, or how often, any minority business enterprise was denied such access."  "Assuming, however, that some firms have been denied public business for racial reasons, the instant statutory remedy is nevertheless demonstrably much broader than is necessary to right any such past wrong.  For the statute grants the special preference to a class that includes (1) those minority-owned firms that have successfully obtained business in the past on a free competitive basis and undoubtedly are capable of doing so in the future as well; (2) firms that have never attempted to obtain any public business in the past; (3) firms that were initially formed after the Act was passed, including those that may have been organized simply to take advantage of its provisions; (4) firms that have tried to obtain public business but were unsuccessful for reasons that are unrelated to the racial characteristics of their stockholders; and (5) those firms that have been victimized by racial discrimination."

"Since there is no reason to believe that any of the firms in the first four categories had been wrongfully excluded from the market for public contracts, the statutory preference for those firms cannot be justified as a remedial measure. In any event, since it is highly unlikely that the composition of the fifth category is at all representative of the entire class of firms to which the statute grants a valuable preference, it is ill-fitting to characterize this as a 'narrowly tailored' remedial measure."

(3)  "that the members of the favored class have a special entitlement to "a piece of the action" when government is distributing benefits."

• "In the short run, our political processes might benefit from legislation that enhanced the ability of representatives of minority groups to disseminate patronage to their political backers.  But in the long run, any rule that authorized the award of public business on a racial basis would be just as objectionable as one that awarded such business on a purely partisan basis."  "The legislators' interest in providing their constituents with favored access to benefits distributed by the Federal Government is, in my opinion, a plainly impermissible justification for this racial classification."

(4)  "that the program is an appropriate method of fostering greater minority participation in a competitive economy."

• "The interest in facilitating and encouraging the participation by minority business enterprises in the economy is unquestionably legitimate.  Any barrier to such entry and growth -- whether grounded in the law or in irrational prejudice -- should be vigorously and thoroughly removed. Equality of economic and investment opportunity is a goal of no less importance than equality of employment opportunity.  This statute, however, is not designed to remove any barriers to entry.  Nor does its sparse legislative history detail any insuperable or even significant obstacles to entry into the competitive market."  

Justice Stevens concluded that the program "cannot fairly be characterized as a "narrowly tailored' racial classification, because it simply raises too many serious questions that Congress failed to answer or even to address in a responsible way."  "It is up to Congress to demonstrate that its unique statutory preference is justified by a relevant characteristic that is shared by the members of the preferred class.  In my opinion, because it has failed to make that demonstration, it has also failed to discharge its duty to govern impartially embodied in the Fifth Amendment to the United States Constitution."