Racial Preferences in Government Contracting: How It Happens and Why It’s Wrong
Last Wednesday, President Joe Biden promoted his plan to spend trillions of dollars on infrastructure. The federal government, Biden says, is committed to building “ports and airports, rail corridors and transit lines” across America. Assuming that infrastructure spending is a foregone conclusion, we should hope that it occurs without government-sanctioned racial discrimination.
Every year, governments at the federal, state, and local levels spend vast sums on public works. Government officials do not build highways, roads, or bridges themselves. Instead, they pay companies to do the work for them. As Professor George LaNoue explained earlier this year, two types of companies participate in the public contracting process. First, general contractors directly submit bids with the government entity, and are responsible for the overall project. But the jack of all trades is a master of none, so a general contractor must delegate particular responsibilities to subcontractors, such as those that specialize in fencing, paving, and the like.
In theory, it would be simple enough for the government to award public contracts on a race-neutral basis. In practice, governments routinely incorporate racial preferences into the public contracting process. In some cases, bid preferences can take work away from the lowest bidder on the project, if that bidder is not minority-owned. In other cases, so-called minority business goals operate as de facto quotas in coercing general contractors to set aside a percentage of subcontracting dollars to minority-owned businesses.
General contractors that fail to meet these “goals” are subject to onerous fines, and may be suspended from working on public projects altogether. And although these requirements often allow contractors to plead their “good faith efforts” in reaching the goals, the “good faith” determination is often made under a vague multi-factor test applied at the whim of a bureaucrat. Thus, the only way to avoid liability for sure is to meet the goals. For some general contractors, this means that the government forces them to do what it cannot: discriminate on the basis of race.
Non-minority-owned subcontractors can also feel the pain of minority-owned business set-asides. Subcontractors that can perform the best work at the lowest price may not still get that work if the goals require the general contractor to obtain a minority-owned business for the task.
Minority business set-asides are incompatible with equal justice under the law. The Constitution forbids racial discrimination; set-asides can require it. New minority business set-asides are routinely enacted. But even decades-old ones have failed to achieve their intended purpose of increasing minority business ownership. The government may take meaningful, race-neutral steps to decrease barriers to entry, whether that comes in the form of reevaluating bond requirements or increasing access to credit. What the government may not do is to discriminate on the basis of race. Many advocate for that important non-discrimination principle in public education. It is time to us to speak up for public contractors too.