Court Ruling Puts Port of L.A.’s Affirmative Action Policy on Hold : Administration: Contractors no longer must make a good-faith effort to find minority- and women-owned firms as subcontractors. City attorney plans to appeal ruling that voters must amend City Charter to allow the program.

For a decade, the Port of Los Angeles, like other city departments, has required contractors to make a “good-faith” effort to subcontract work to businesses owned by women and minorities--or forfeit their contracts.

But now that a recent state Court of Appeal decision has taken the teeth out of the city’s affirmative action program, port administrators say they can do little more than hope that contractors will voluntarily work with minority- and women-owned businesses.

And they don’t have much faith that that’s going to happen.

“If we are not able to have some ability to (bypass low bidders who fail to make a good-faith effort) then, no, we will not continue to have the level of participation that we do now,” said Bill Stein, director of port administration. “Every time we (bypass a low bidder) it sends a clear signal to the construction community that we’re very serious about (the program).”

During the fiscal year that ended June 30, about 23% of the $75 million in port construction spending went to minority- and women-owned businesses. The port has helped ensure such results by keeping a comprehensive database on 775 businesses owned by women and minorities and matching those businesses with contractors.

But the program was undercut last month when a two-member majority of the state Court of Appeal ruled that then-Los Angeles Mayor Tom Bradley exceeded his authority when he issued an executive order in 1983 making affirmative action policy a required part of the competitive bidding process.

The appeals court said the city’s affirmative action program cannot be implemented unless voters first amend the City Charter, which requires the city to award contracts to the lowest responsible bidder.

On the advice of City Atty. James Hahn, the port has stopped enforcing its affirmative action program while the city appeals the court decision, a process that could take up to six months.

For some minority and women contractors, the prime benefit of the program was not always the port contracts themselves, but rather the array of personal contacts they made with other business people while doing work for the port.

“It’s made a large difference with us in terms of access to markets,” said Edward Valverde of Valverde Construction of Santa Fe Springs. “Before (the port) started their program, we had very limited access to the large contractors. But when the program started they were forced to look for (minority and women-owned businesses)--not necessarily use them, but at least look.

“The big contractors are very cliquish,” said Valverde, whose company lays underground pipelines. “It’s an ‘old boys’ club, and I can understand that. You tend to use the same people because you know their quality, their experience, and you know their work.

Because of his company’s involvement with the city’s affirmative action effort--officially known as the Minority and Women’s Business Enterprise Program--Valverde’s sales have increased by 20% to 30% in the past five years, he said. Valverde doubts the larger contractors will voluntarily reach out to minorities and women. “They’ll fall back into the habit of using contractors they know,” he said. “But luckily, I’m one of the ones they know, so they’ll still ask me for a price.”

Consultant Gayla Kraestch Hartsough, owner of KH Consultants, said she made valuable business contacts from the city’s affirmative action program. But like Valverde, she said the program did not result in a flurry of lucrative contracts.

“The Port of Los Angeles has been a wonderful client, and we’ve had an ongoing working relationship with them,” Hartsough said. “But I think being a woman-owned firm has absolutely no advantage.

“And frankly, there’s a lot of headaches that go along with the certification process to prove you’re woman-owned,” Hartsough said. “The paperwork is incredible, and then every three to six months someone comes to make sure I’m really a woman.”

The Minority and Women’s Business Enterprise Program required contractors to follow a 10-point procedure to attempt to include women and minority subcontractors in their proposals. Among other things, contractors had to prove that they tried to contact a variety of minority- and women-owned businesses for possible inclusion in their bids.

The rules were the same for minority- and women-owned businesses that received contracts directly from the port: They, too, were required to make a good-faith effort to subcontract work to other minority- and women-owned businesses, said the port’s Stein.

The company that challenged the city’s law, Domar Electric, had argued that (Los Angeles) inappropriately imposed a race-conscious program without adequate documentation of past discrimination.

Documentation, however, may be on the way.

In 1989 the city hired consultants to study whether it had discriminated against businesses owned by women and minorities. The study was commissioned in response to a state Court of Appeal decision overruling the city’s previous affirmative action policy, which set numerical goals for companies rather than simply requiring a good-faith effort.

The results of the study still are pending, but if they show that the city has discriminated on the basis of race, then officials will be allowed once again to set hiring goals for contractors.