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Surprise result when city ends preferences in contracting

Supporters of racial and gender preferences in public contracting claim that preferences are needed because, without them, few contracts would go to minority- or women-owned firms. But a study recently done for Charlotte, N.C., reached exactly the opposite conclusion. After race and gender preferences ended, work awarded to minority- and women-owned businesses increased.

How can that be?

A bit of history is needed: Not long ago, Charlotte had a Minority- and Women-owned Business Enterprise (MWBE) program with preferential goals in its public contracts. The goals were suspended in 2002 as the result of a court challenge. The following year the city started its Small Business Opportunity program.

The SBO program sets a 12 percent goal for small businesses, regardless of race, ethnicity, or sex. That is, 12 percent of the total value of the contract must be subcontracted to small business. Contractors could not refuse to subcontract out some work simply because that meant less profit, and the requirement that they show good-faith efforts to hire a small business was strictly enforced.

The program worked well, but predictably there was political pressure for a return to a race-conscious program. Consequently, the city commissioned, at the cost of $305,000, a disparity study to measure the use of MWBEs on city contracts. The study was needed, the city's website explained, to "determine if there is just cause to support the creation of a minority and woman business program."

The study, released last month, determined there was no such justification, and it recommends against the return of race-conscious goals.

The study found at best "limited evidence" of discrimination against MWBEs on prime contracts (those awarded directly by the government to a company providing goods or services that government needs). Charlotte, like virtually every government, awards its prime contracts on a low-bid system. Bids are submitted by all interested parties, and remain sealed until they are opened in public. The lowest responsible bidder gets the contract. The system helps ensure merit-based, rather than racially discriminatory, decision making.

The way to fight discrimination in public contracting is with transparency - not with more discrimination.

And so it was unsurprising that, when the disparity study compared the availability of MWBEs with their share of Charlotte prime contract dollars, the evidence of discrimination was thin indeed.

Consider: On professional service contracts, businesses owned by Asian Americans and white women received fewer contract dollars than their numbers in the marketplace would suggest - but African Americans, Hispanic Americans, and Native Americans got many more dollars than would be expected. African Americans and Native Americans also do well on goods and supplies contracts, but this time Hispanic Americans do not do as well. Asian Americans do well on construction and architect/engineering contracts, but not so much in professional services, other services, and goods and support firms.

No theory of discrimination could explain these patchwork results. It's just the market at work.

If the city is not discriminating in its award of prime contracts, might the white male prime contractors be discriminating with regard to MWBE subcontractors? Nope. To the contrary: On construction contracts, the percentage of dollars going to MWBEs more than tripled since 2003, the first year the race-neutral program was in full force. And on architecture and engineering subcontracts, the dollar utilization of MWBE subs more than doubled. What's more, the study reports, there were no complaints filed under the commercial nondiscrimination ordinance.

Could it be that a nondiscriminatory program actually increased the trust and respect among contractors and subcontractors of all racial and ethnic groups and both sexes?

Some local politicians are apparently grumbling about the disparity study's results. The instinctive support of some for race-conscious goals and set-asides remains strong. But no one can fairly criticize the current program.

Charlotte's race-neutral program clearly works. It works for the minority- and women-owned businesses, which are thriving. And it works for the small white-male-owned businesses in the program, too. Charlotte has administered the program long enough and aggressively enough to yield positive results, and it should be praised for doing so.

More than two decades ago, the U.S. Supreme Court struck down a racially discriminatory contracting program in Richmond, Va. Since then, preferences have been constitutional only after race-neutral approaches are shown to have failed. Far too few cities and counties with race- and gender-preference programs have made serious efforts at replacing them with race- and gender-neutral efforts.

Charlotte was one of those cities until it got sued. But to its credit, it has now pushed an effective and nondiscriminatory small-business program. Here's hoping that more cities follow Charlotte's lead - and don't wait to get sued to do so.

John Sullivan is a lawyer with the Project on Civil Rights and Public Contracting
Roger Clegg is president and general counsel of the Center for Equal Opportunity