Losing Preferential Treatment Termed a ‘Tremendous Blow’ : Minorities Fear Ruling Will Close Doors Again

Minority business people could hear doors that had been budged ajar over the last few years slamming shut again Monday in the wake of a U.S. Supreme Court decision erecting barriers to government contracting programs that give preferences to women and minorities.

In nearly 200 states, counties and cities, set-aside programs guaranteeing minority- and women-owned firms a quota of government spending could be threatened by the court’s ruling, as could policies setting only goals, rather than quotas, for minority contracting, executives said.

There are no local set-aside programs in Orange County; the only minority set-aside rules used by local governments are those that apply to federally financed projects. Nonetheless, the ruling is “frightening” to Hollis Smith, director of the Orange County Purchasing Council--a nonprofit minority business organization.

“The general message is that while minorities have been able to look to the courts to get a reasonable shot at opportunities that are available to most Americans, there now is going to be cause for disappointment. If this ruling spreads, we will have no leverage to get business or be considered for business opportunities where there are efforts to exclude minority businesses.”

In places like Orange County, where there are no government set-aside programs, the high court’s Richmond ruling, Smith said, “will have a great psychological impact by discouraging capable minorities from getting into the mainstream.”

The loss of such programs “would be a tremendous blow,” said James D. Jefferson, president of the San Francisco Black Chamber of Commerce.

Given Preference in Bidding

Jefferson’s real estate development firm has received more than $1 million in contracts from the city and county of San Francisco under a local ordinance that gives minority- and women-owned firms as much as a 10% preference in competitive bidding. The contracts, Jefferson said, were ones his firm “would not have won were it not for the ordinance.”

The San Francisco program is one of at least 18 across the country facing separate court challenges on grounds similar to those successfully advanced against Richmond, Va.’s, minority contracting set-aside policy.

A federal appeals court has upheld the claim of Associated General Contractors of California that the San Francisco program violates a charter provision requiring that contracts be awarded to the lowest responsible bidder. The case still is pending before the U.S. 9th Circuit Court of Appeals.

However, Jefferson noted that the program--like many of those in other localities--was established because of the local government’s poor track record in giving business to firms owned by non-whites and women.

‘Gross Discrepancies’ Claimed

“Minorities and women combined were only doing 2.8% of the contracting at the prime contractor level . . . in a city with a minority population of (nearly) 50%,” he said. “So you can see right away, there’s some gross discrepancies.”

Richard B. Munn, executive vice president of Associated General Contractors, said Monday that the group now will consider a court challenge to a consent decree requiring that women- and minority-owned firms receive a substantial share of the work on the massive Century Freeway construction project in Los Angeles County.

Nationally, the business channeled to minority- and women-owned firms through special programs amounts to billions--25% of municipal spending in Philadelphia, for instance, and 30% in Chicago.

In California, a new law effective this month establishes a goal that all state agencies spend 15% of their contracting dollars with minority firms and 5% with women-owned companies. If the goals had been fully realized last year, such firms would have won $720 million in state contracts--double the $362 million they actually received.

The Pacific Legal Foundation, which filed suit last year in an unsuccessful attempt to overturn the California program, said Monday that it will renew its legal challenge in light of the Supreme Court decision.

“It is time to get beyond awarding contracts on the basis of race or sex,” said Ronald A. Zumbrun, the legal foundation’s president. “Public contracts should be awarded on the basis of competitive bidding without regard to the race or sex of the bidder.”

However, lawmakers who were instrumental in enacting the state law said they hoped the fact that it establishes goals, rather than a formal set-aside, or quota, would allow it to survive any legal challenge.

“In California, we set the standards appropriately so we can fully justify the concept,” Assembly Speaker Willie Brown (D-San Francisco) said.

Neither the city nor county of Los Angeles has a formal set-aside program, with both instead establishing percentage goals for minority contracting.

For the last several years, Los Angeles city officials have wrestled with the problem of how to more effectively grant city contracts to minority-owned firms. The city is currently operating under an executive directive issued by Mayor Tom Bradley that has not been followed consistently by various city agencies, officials said.

The city’s affirmative action programs “have been used to advance the interests of specific individuals occasionally and not to advance the causes of minority-owned businesses,” Councilman Zev Yaroslavsky said. “This has been one of my pet peeves about the program. It’s not what you know but who you know that gets you in around here.”

Minority business people say preferences, set-asides and goals play a critical role in the development of their companies.

“They give us opportunities,” said Nancy Underwood, president of an occupational safety consulting firm in Los Angeles. “It opens doors for us to say: ‘Yes, we have experience in this area; yes, we can do this work; yes, we can perform on time and on schedule.’ ”

Minority executives worry, too, that the Supreme Court ruling will discourage private companies from establishing or expanding special programs that reach out to minority-owned suppliers and contractors.

“It’s going to have a real ripple effect, and I think the effect is going to be detrimental,” said Lynne Choy Uyeda, an advertising and public relations executive in Los Angeles who is president of the Asian Business Assn.

Staff writers John O’Dell in Orange County, Leo C. Wolinsky in Sacramento and Glenn F. Bunting in Los Angeles contributed to this story.