[Federal Register Volume 62, Number 90 (Friday, May 9, 1997)]
[Notices]
[Pages 25648-25653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12190]
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DEPARTMENT OF JUSTICE
Response to Comments to Department of Justice Proposed Reforms to
Affirmative Action in Federal Procurement
AGENCY: Department of Justice.
ACTION: Notice.
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SUMMARY: On May 23, 1996, the Department of Justice published its
Proposed Reforms to Affirmative Action in Federal Procurement. 61 FR
26042. The Department reviewed over 1,000 comments. This report
discusses the observations and concerns most frequently expressed, and
describes the changes to the proposal that were made in response to
those comments. In addition, the Federal Acquisition Regulatory Council
is today publishing for comment proposed amendments to the Federal
Acquisition Regulation that will implement the contracting mechanisms
described in the Justice Department proposal.
FOR FURTHER INFORMATION CONTACT: Mark Gross, Civil Rights Division,
P.O. Box 66078, Washington, D.C. 20035-6078, telefax (202) 514-8490.
Introduction
On May 23, 1996, the Department of Justice published its Proposed
Reforms to Affirmative Action in Federal Procurement. 61 FR 26042.
These reforms will ensure that the use of affirmative action in federal
procurement complies with the strict scrutiny standard discussed in the
Supreme Court's decision in Adarand Constructors, Inc. v. Pena, 115 S.
Ct. 2097 (1995).
The Justice Department received more than 1,000 individual
responses to the proposal; many of those contained a number of
different and lengthy comments. We greatly appreciate the time and
effort so many individuals, companies, private organizations, and
government personnel from cities, states, and federal agencies, took to
respond to the proposal. The comments raised many of the difficult
issues that were considered during the preparation of the proposal, as
well as many new ones.
This report will not summarize all the comments that were received,
but rather, will discuss those observations and concerns most
frequently expressed. The report will identify the changes we have made
to the reform proposal both in response to the comments and as a result
of our continuing work on the proposal, and those issues that remain
under consideration.
The Federal Acquisition Regulatory Council is publishing today the
proposed amendments to the Federal Acquisition Regulation (FAR)
necessary to implement the proposed reforms, including procedures to
implement Section 7102 of the Federal Acquisition Streamlining Act
(FASA) and to further implement 10 U.S.C. 2323. These statutes permit
federal agencies to allow competitive advantages, including price and
evaluation credits, in awards involving small businesses owned and
controlled by socially and economically disadvantaged persons (SDBs).
The regulation explains how consideration of social and economic
disadvantage will be made in the contracting process. The Small
Business Administration (SBA) will be publishing regulations that
describe the new process by which firms can be determined to be SDBs.
I. Eligibility and Certification
A. Determination of Social and Economic Disadvantage
Many of the comments expressed concern that the proposal could
permit each federal agency to determine whether firms are owned and
operated by individuals who are socially and economically
disadvantaged. The primary concern was inconsistent decisions by
different agencies, leading to forum shopping, where firms would search
to find the agency with the most lenient standards. While that
possibility is less of a concern for persons who belong to minority
groups statutorily presumed to be socially and economically
disadvantaged,1 the
[[Page 25649]]
concern expressed in quite a few comments was that individual agency
determinations could lead to inconsistent results when persons who are
not members of ``presumed groups'' seek to be determined to be socially
and economically disadvantaged. The comments almost universally
suggested that determination of social and economic disadvantage be
made exclusively by the SBA, which already makes similar determinations
under the 8(a) program.
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\1\ Both FASA and 10 U.S.C. 2323 (which, in language similar to
that in FASA, permits the Department of Defense, NASA, and the Coast
Guard to use less than full and open competition in order to aid
SDBs) incorporate by explicit reference the definition of social and
economic disadvantage contained in Section 8(d) of the Small
Business Act. Pursuant to Section 8(d), members of designated groups
are presumed to be both socially and economically disadvantaged;
those presumptions are rebuttable. By contrast, under the separate
program established under Section 8(a) of the Small Business Act
(the 8(a) program), members of identified groups are rebuttably
presumed to be socially disadvantaged, but must establish that they
are economically disadvantaged.
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The proposal stated that while agencies could perform this function
themselves, it also stated that an agency might wish to assign this
responsibility to SBA. Consistency is a critical feature, and the SBA
is in the best position to ensure consistent application of standards
on social and economic disadvantage. As a result, the SBA has been
assigned responsibility for developing procedures and standards that
will govern federal determinations of social and economic disadvantage,
and will be assigned to do determinations of social and economic
disadvantage. A system will be developed that will ensure that SBA has
resources to support this effort.
B. Certification of Ownership and Control
A number of comments also questioned the proposal's decision to
rely on private, state and local organizations to make certifications
that a firm is owned and controlled by socially and economically
disadvantaged individuals. Those comments urged the government to
permit SBA to make that certification, noting that this approach would
be more efficient for SDBs. As stated in the original proposal,
however, there already is an exhaustive system of private, state and
local certifiers of ownership and control in place, and creation of a
federal structure to perform this process seems unnecessary and
wasteful.
C. Re-certifications
A number of comments stated that it was unnecessarily expensive to
require SDBs to provide updated certifications of ownership and control
every three years. The comments urged the government to permit SDBs
simply to update their certifications and to keep the certification for
a longer period, perhaps five years.
The interval between certifications will remain at three years. The
effort to meet strict scrutiny requires that the benefits of
affirmative action go only to those individuals and firms that truly
qualify for competitive advantages. One way is to ensure that firms
that are determined to be SDBs continue to be eligible for that status.
While annual updates will help that process, many firms undergo
significant changes within three years of operation. Recertification of
ownership and control every three years will help to ensure the
accuracy of the list of eligible SDBs, and thereby help to ensure that
the government's programs meet the standards of strict scrutiny. Every
effort has been made to balance the potential impact of the
certification process and the need to ensure the validity of the
certification.
D. Use of the Preponderance of the Evidence Standard for Social and
Economic Disadvantage of Individuals Who Do Not Qualify for a
Presumption of Disadvantage
As explained in the proposal, under FASA and 10 U.S.C. 2323 members
of designated minority groups seeking to participate in SDB programs
fall within the statutorily mandated presumption of social and economic
disadvantage established in Section 8(d) of the Small Business Act.
Individuals who do not fall within the statutory presumption can
qualify for SDB status by proving that the individuals who own and
control the firm are socially and economically disadvantaged. Under
current SBA practice for certifying individuals under the 8(a) program,
those individuals who are not members of presumed groups must prove
social and economic disadvantage by clear and convincing evidence. The
proposal would change that standard of proof to a preponderance of the
evidence.
Many comments urged us not to change the standard of proof.
Generally, the comments asserted that lowering the standard could
permit companies owned by individuals who are not truly socially and
economically disadvantaged to qualify as SDBs and to win contracts that
should go to legitimate SDBs. Those comments stated that the relatively
small number of federal procurement contracts that now go to firms
owned by minorities pursuant to affirmative action initiatives should
not be reduced by awards going to non-deserving firms owned by non-
minorities.
There is significant legal support for the use of the preponderance
of the evidence when an agency is determining what is essentially a
question of civil law. The Supreme Court has held that the
preponderance of the evidence standard is appropriate for most
inquiries made in civil litigation, including questions of
discrimination. Price Waterhouse v. Hopkins, 490 U.S. 228, 252-255, 261
(1989). See also Herman & MacLean v. Huddleston, 459 U.S. 375, 389-390
(1983), in which the Court indicated that the clear and convincing
evidence standard should be limited to those civil questions in which
``particularly important individual interests or rights are at stake,''
and cited as examples termination of parental rights, involuntary civil
commitment, and deportation. The SBA's inquiry as to social and
economic disadvantage is most comparable to the discrimination inquiry
in Price Waterhouse, which was subject to the preponderance of the
evidence standard.
Furthermore, changing the standard of proof should not permit
persons who are not truly socially and economically disadvantaged to
receive determinations of eligibility they do not deserve. The burden
of proof to show that one is socially and economically disadvantaged
remains with the applicant. Careful scrutiny of applications under
proper standards will result in rejection of undeserving applicants
that fail to prove to SBA that they are actually socially and
economically disadvantaged. The SBA will review these applications
rigorously to ensure that only truly deserving candidates are
determined to be SDBs.
Finally, some comments cautioned that if more non-minority firms
became SDBs as a result of the lower standard of proof, reporting all
SDB contracts as part of the utilization of minority firms will over-
state the number of contracts actually awarded to minority-owned firms.
In the event that occurs, the General Services Administration (GSA) and
other governmental agencies will explore methods to ensure that only
contracts that are awarded to minority-owned firms are reported as such
when the utilization figure is compiled and compared with the
benchmark.
E. Timing of Certifications
At least one inquiry asked whether an SDB needed to have its formal
determination of eligibility before it could respond to a solicitation
as an SDB, or whether it would be sufficient if the SDB had secured its
determination of eligibility by the time the contract actually was
awarded. A middle ground will be adopted.
Requiring all SDBs to have final determinations of eligibility in
hand before being able to respond in any way to a solicitation might
encourage firms to seek eligibility on the assumption
[[Page 25650]]
that they might want to use it at some point in the fiscal year. It is
clear that, at least at the beginning of this program, there will be a
large number of firms seeking to be eligible SDBs, and it is important
that people not be encouraged to seek that status if they are unsure
whether they would ever have occasion to use it.
The proposed regulation amending the FAR states that the
contracting officer will specify in the solicitation the date by which
each SDB must have official determination of eligibility. That date
will be early enough in the process to allow offerors a reasonable
opportunity, consistent with the needs of the procurement, to obtain a
determination of SDB status before the contract award process is
completed. The award of a contract will not be delayed to permit a firm
to secure SDB status after the date specified by the contracting
officer.
II. Benchmark Limits
A. Use of SMOBE Data
The proposal states that the system will rely primarily on Census
data to determine the capacity and availability of minority-owned
firms. A number of comments stated that the Census Department's SMOBE
(Survey of Minority-Owned Business Enterprise) data are incomplete. The
comments stated that SMOBE may not count certain types of corporations
and has other reporting problems. A number of comments stated that the
government should focus on those firms that are ``ready, willing and
able'' to participate in government contracting when determining
whether present methods of contracting unfairly exclude minority-owned
firms, and that SMOBE or other similar data may not accurately describe
the universe of such firms.
The Commerce Department has addressed a number of ways to fill in
information not contained in SMOBE, and is refining those data. The
Commerce Department has also been working to determine the appropriate
database, or combination of databases, to measure the availability and
capacity of existing minority-owned firms for purposes of establishing
the benchmark figure for minority capacity.
B. Use of Two-Digit SIC Codes
The proposal stated that benchmarks would be established in each
two-digit Standard Industrial Classification (SIC) code. A number of
comments asserted that two-digit SIC codes were too broad to be used
for this purpose. Some comments stated that the use of two-digit SIC
codes runs the risk of yielding an erroneous vision of a particular
industry. For example, one comment stated that where minority firms in
one four-digit SIC code within the larger two-digit classification were
very successful, the government might be receiving an erroneous
impression of the state of minority contracting in other activities
within that two-digit SIC code and assume incorrectly that minority
firms in those activities were successful.
The proposal used two-digit SIC codes for several reasons. First,
available Census data would not support capacity estimates at the four-
digit level. Second, were the necessary data available, it would be
extremely burdensome to implement benchmarks for all the four-digit
SICs in which federal contracting takes place.
However, a Department of Commerce analysis using the Federal
Procurement Data System indicates that 40 four-digit SIC codes
accounted for approximately 80% of dollars awarded under prime
contracts above $25,000 in FY 1995. Thus, a suitably expanded Survey of
Minority-Owned Business Enterprises could support future use of four-
digit SIC codes in these industrial activities.
C. Areas With Little Minority Availability and Capacity
Several comments stated that, by tying benchmarks to the existing
availability and capacity of minority-owned firms, the government could
be continuing to exclude minority-owned firms from industrial areas in
which they have had little success.
While the benchmark will be based in large part on the existing
capacity and availability of minority-owned firms, consideration will
also be given to the extent to which the effects of racial
discrimination have impeded the ability of minority individuals to
become entrepreneurs, and the ability of minority-owned firms to grow.
The consideration of the effects of discrimination, as applied in these
and other circumstances, may increase the benchmark beyond the
estimates of the present existence of minority-owned firms,
particularly in those areas in which there is little minority activity.
The Commerce Department is still working to develop the statistical
assessment of these effects of racial discrimination.
D. Exclusion of Small Firms From the Benchmarks
The proposal stated that we were considering, when establishing the
benchmarks, excluding those firms that are simply too small to have
competed for and won federal contracts. Several comments stated that
excluding such small firms would freeze the effects of discrimination
on those firms, as discrimination has limited the ability of many
minority firms to grow and compete for federal contracts.
This comment may be addressed in three ways. In particular
industries, it may be appropriate to forego any adjustments in
recognition that discrimination has suppressed firm size. In others,
the phenomenon may be addressed by the assessment of the effects of
racial discrimination on minority business development. And, finally,
as a practical matter, the Commerce Department, during its analysis of
benchmarks, has identified industrial areas in which very small firms
have won contracts, and so there may not be a reason to exclude any
firms when the benchmarks are calculated in some SIC codes. It is not
clear, at this time, whether there will be SIC codes in which federal
contracts or subcontracts are always so large that an exclusion of
small firms is appropriate. That determination will be made as final
benchmarks are established in all SIC codes.
E. Benchmarks Should Consider Discrimination by the Private Sector
A number of comments urged consideration of the fact that
discrimination has limited participation by minority-owned firms in the
private sector. Those comments stated that considering curtailing or
eliminating affirmative action when federal contracting has reached or
exceeded those benchmarks ignores the broad discrimination occurring in
the private sector.
The effects of private discrimination will be reflected in the
assessment of the extent to which discrimination has impeded the
development and growth of minority-owned firms. This factor will be
critical when the assessment is made in any SIC code to curtail or even
eliminate the use of price or evaluation credits. While affirmative
action in federal procurement is not a means to make up for
opportunities minority-owned firms may have lost in the private sector,
it is intended to ensure that federal procurement is a means for
minority-owned firms to secure full and fair treatment, which may well
translate into more success for those firms in private commercial
efforts.
F. Evidence of the Effects of Discrimination
The proposal stated that a statistical calculation representing the
effect discrimination has had on suppressing minority business
development and capacity would be made, and that
[[Page 25651]]
calculation would be factored into benchmarks. The Department of
Commerce continues to work to develop this calculation.
Regardless of the outcome of that statistical effort, the effects
of discrimination will be considered when utilization exceeds the
benchmark and it is necessary to determine whether race-conscious
measures in a particular SIC code should be curtailed or eliminated.
Before race-conscious action is decreased, consideration will be given
to the effects discrimination has had on minority business development
in that industrial area, and the need to consider race to address those
effects.
III. Interaction of Benchmarks and Mechanisms
A. Reservation of Contracts
The proposal stated that the authority to reserve contracts for
bidding by SDBs would not be invoked for at least two years after
implementation of the proposed system. The purpose of that waiting
period was to allow evidence to accumulate regarding the effectiveness
of the new system. The proposal contemplated that after two years the
system would be evaluated to consider whether reservation of contracts
might be appropriate if the system clearly was unable to remedy
persistent and substantial underutilization of minority firms in
particular industries resulting from past or present discrimination.
Numerous comments suggested that this two-year evaluation period
was too inflexible. While, as stated in the proposal, we believe that
the new system should make reservation of contracts unnecessary, we
also believe a modification of the proposal is appropriate. The
determination whether to consider reservation of contracts in any
industry should turn not on the lapse of any particular period of time,
but on the amount and strength of the evidence regarding the
effectiveness of the new system in that industry. Thus, where the
Department of Commerce, in consultation with the Department of Justice,
the General Services Administration, and the Small Business
Administration, finds substantial and persuasive evidence of (1) a
persistent and significant underutilization of minority firms in a
particular industry, attributable to past or present discrimination,
and (2) a demonstrated incapacity to alleviate the problem by using the
proposed system, then the agencies may be authorized to reserve
contracts. This is a rigorous standard, and contracts will not be
reserved until it is met.2
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\2\ This discussion does not apply to the 8(a) program, which,
as described in the proposal, has unique indicia of narrow
tailoring.
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B. Counting 8(a) Contracts Toward the Benchmark Limits
A number of comments asserted that the government should not
include contracts awarded pursuant to the SBA's 8(a) program when
determining the amount of money that has been awarded to minority-owned
firms in each SIC code. The reason, many asserted, was that the 8(a)
program is not based on racial considerations, but rather is a race-
neutral business development program. Therefore, the comments stated,
race should not be considered to have been a factor in the award of
those contracts. The comments also stated that, if achievement of a
benchmark is an indication that there is less of a need for affirmative
action programs, we should not count 8(a) contracts because those
developing firms are not fully competitive, and the award of an 8(a)
contract is not an indication that the minority-owned firm would fare
as well in open competition.
First, while the 8(a) program is a business development program,
the race of the owner of a firm is a factor in the manner in which a
firm may become certified as eligible for an 8(a) contract. Therefore,
8(a) is not an entirely ``race-neutral'' program. Second, and more
importantly, these comments may reflect a misunderstanding of the
assessment that will be made at the end of each fiscal year. As
explained in the proposal, the benchmark figure will represent the
extent to which the government would expect contract dollars in
particular industrial activities to be awarded to minority-owned firms
in the absence of discrimination or its effects. The reason to measure
the extent to which minority-owned firms have received federal
contracts is to determine whether race-conscious programs, like price
or evaluation credits, continue to be needed to ensure that firms owned
by minorities have a fair opportunity to compete for and win federal
contracts.
This assessment must count all contracts awarded to minority-owned
firms, whether through race-conscious programs or through free and open
competition. Only by determining the extent of minority participation
in contracting, and then by determining whether that participation has
been achieved through full and open competition, race-conscious action
programs, or by a combination of the two, can we determine whether
race-conscious programs continue to be needed in that SIC code.
Therefore, when a contract is awarded to a minority-owned firm through
the 8(a) program, it must be counted towards the benchmark. It must be
counted simply because the firm that was awarded the contract is owned
and operated by a minority individual or individuals.
This does not mean, however, that the fact that the contract was
awarded pursuant to the 8(a) program is irrelevant to the question
whether the use of race-conscious action in a particular SIC code
should continue, be curtailed, or even be eliminated. If the amount of
federal contract money awarded to minority-owned firms in a particular
SIC code exceeds the benchmark, the determination of the extent to
which race-conscious measures may be permissible in the next year will
consider how the awards were made. If the benchmark is significantly
exceeded in an SIC code, but a large percentage of minority contracts
would not have been awarded to minority-owned firms without the use of
8(a) and/or price or evaluation credits, that might indicate that the
use of price credits, or even of the 8(a) program, should be cut back,
but not eliminated.
Accordingly, the fact that an award made to a minority-owned firm
pursuant to 8(a) is counted towards the benchmark does not ignore the
purposes of the 8(a) program. The proposal contemplates continued use
of the 8(a) program as an effective means to develop small socially and
economically disadvantaged businesses.
C. Counting Subcontracts Awarded Pursuant to a Prime Contractor's
Subcontracting Plan Toward the Benchmark
Other comments raised a similar point; subcontracts awarded to
minority-owned firms should not count toward the benchmarks if they
were awarded pursuant to the subcontracting plan that Section 8(d) of
the Small Business Act requires of prime contractors. The comments
stated that they should not be counted because race is not a factor in
the award of the subcontract. For the same reasons that contracts
awarded to minority-owned firms pursuant to 8(a) must be counted toward
the benchmark, subcontracts to minority-owned firms--whether awarded
through race-based measures or direct competition--must be counted as
well.
[[Page 25652]]
D. When Achievement of the Benchmark in an SIC Code Will Result in
Curtailment or Elimination of Race-Conscious Action in that SIC Code
A number of comments requested clarification of precisely when
achievement of a benchmark would result in curtailment or elimination
of affirmative action measures. Some of these comments suggested a
misunderstanding of the proposal.
Achievement of a benchmark in a particular SIC code does not
automatically mean that race-conscious programs, or the use of 8(a)
contracts, will be eliminated in that SIC code. The purpose of
comparing utilization of minority-owned firms to the benchmark is to
ascertain when the effects of discrimination have been overcome and
minority-owned firms can compete equally without the use of race-
conscious programs. Full utilization of minority-owned firms in an SIC
code may well depend on continued use of race-conscious programs like
price or evaluation credits. Where utilization exceeds the benchmark,
the Office of Federal Procurement Policy (OFPP) may authorize the
reduction or elimination of the level of price or evaluation credits,
but only after analysis has projected the effect of such action.
E. Ensuring That Prime Contractors Actually Use SDB Subcontractors
A few comments asserted that many non-minority prime contractors
commit to use SDBs as subcontractors in order to be awarded a prime
contract, but do not actually use the SDBs, or use SDBs to a lesser
extent than proposed.
The proposal addresses this problem in a number of ways. First, the
extent of an evaluation credit given to a prime contractor increases as
the commitment to SDBs becomes more firm. Prime contractors who present
written, enforceable subcontracting commitments to specific SDBs will
receive more consideration in an evaluation context than those who
simply promise to find SDBs as subcontractors during the course of the
contract. The more enforceable the commitment to SDBs, the higher the
evaluation credit. Second, the extent to which a prime contractor has
honored a commitment to subcontract to SDBs may be a factor when the
prime contractor bids on a subsequent contract.
Some comments stated that it would be very difficult for prime
contractors to assign an SIC code to subcontracting opportunities at
the bidding stage. The proposal has a provision that will significantly
ease the administrative burden of reporting subcontracting. The prime
contractor may report subcontracts based on the predominant SIC code of
the subcontractor. The subcontracting firm need only report to the
prime contractor the SIC code in which it does most of its work, and
the prime may then report that SIC code for purposes of reporting
subcontracting.
Several comments stated that it would be a hardship for prime
contractors to help secure determinations of eligibility for those SDBs
it will use as subcontractors. These comments may reflect a
misunderstanding of the proposal. No prime contractor is responsible
for issuing determinations of eligibility, or for helping to establish
the eligibility of an SDB it proposes to use as a subcontractor. That
is the responsibility of the SDB. In order to receive a price or
evaluation credit based on subcontracting, however, the prime
contractor must demonstrate that its commitment is to eligible SDBs.
The prime, therefore, while not involved in the process of determining
or securing determinations of eligibility for SDBs, must ensure that
when it submits a bid that seeks a price or evaluation credit based on
subcontracting to SDBs, the firms it identifies as SDBs have been
determined eligible.
Finally, a number of comments urged the government to use mentor-
protege programs aggressively. The proposal mentions mentor-protege
programs as one of the outreach and technical assistance programs the
government seeks to use to increase participation of SDBs in federal
contracting. Mentor-protege programs have been an effective way of
increasing participation of minority-owned firms in federal
contracting, and we are hopeful that such programs will continue.
F. Joint Ventures
A number of comments stated that joint ventures of non-minority and
minority-owned firms provide the minority-owned firm an opportunity to
secure a share of federal contracts. Under the proposed amendments to
the FAR, joint ventures will be eligible for price credits.
G. Contracts for Commercial Items
Several comments noted that it would be very difficult to assess or
evaluate subcontracting opportunities under contracts for commercial
items. While there are difficulties, commercial items are covered.
IV. Miscellaneous Comments
A. Funding of the 7(j) Program
Many comments expressed a concern that while the proposal relies
significantly on the SBA's 7(j) program that provides technical and
management assistance to qualifying individuals, Congress has not
funded that program. That concern is legitimate, and the Administration
is exploring measures to keep the program viable.
B. Women-Owned Firms
A number of comments expressed concern that the government appeared
to give no consideration in this proposal to firms owned and operated
by women, despite the fact that many women entrepreneurs had endured
the effects of discrimination similar to that suffered by minorities.
Some portions of the proposal, such as the lowering of the standard
of proof for non-minority firms as SDBs to preponderance of the
evidence, could affect women-owned firms. Plainly, the portions of the
proposal that address the manner in which race-conscious measures are
permissible do not address women-owned firms not owned by minorities.
The proposal concentrates on firms owned and operated by minorities
because the regulation will implement Section 7102 of FASA and 10
U.S.C. 2323, and those statutes do not authorize affirmative action for
women. Section 7102 permits the federal government to take affirmative
action, including granting price and evaluation credits, for ``small
business concerns owned and controlled by socially and economically
disadvantaged individuals * * *.'' That provision refers to subsection
(d)(3)(C) of Section 8 of the Small Business Act (15 U.S.C. 637), which
in turn defines social disadvantage in terms of ``racial or ethnic
prejudice or cultural bias.'' Women are not so designated, and
therefore these portions of the proposal are limited to implementing
affirmative action for the minority groups designated under FASA.
While women-owned firms, per se, are not eligible for the price and
evaluation credit program enacted by FASA or 10 U.S.C. 2323, there are
other avenues by which the federal government tries to ensure that
women-owned firms have an equal opportunity to compete for and win
federal contract dollars. The Small Business Act requires agencies to
set annual goals for participation in contracting by women-owned firms.
Women-owned firms may be certified under the 8(a) program by
demonstrating to the SBA that the firm is owned and operated by a woman
or women, and that the individual women who operate the firm have
suffered social and economic disadvantage similar to that suffered by
members of minority groups. The Adarand decision
[[Page 25653]]
applies strict scrutiny to actions of the federal government that use
race. Actions taken with respect to gender, however, are scrutinized by
a lesser standard of review, and thus the same requirements we propose
to ensure that race-conscious programs are narrowly tailored should not
necessarily also apply to programs for women.
C. Compelling Interest for the Use of Race-Conscious Measures
A few comments questioned the federal government's ability to use
race-conscious action in procurement. Those comments stated that there
was an insufficient record of discrimination by the government in
procurement to support race-conscious activity.
When the proposal was published in the Federal Register, it was
accompanied by an appendix titled ``The Compelling Interest for
Affirmative Action in Federal Procurement: A Preliminary Survey.'' 61
FR 26050. That report documented the effects public and private
discrimination has had on business formation and development, and the
way discrimination has hindered the ability of minority-owned firms to
compete for and win federal contracts. The report demonstrated that
race-conscious means are still necessary to ensure that minority-owned
firms have the ability to compete fairly for federal procurement
dollars.
Subsequently, the Urban Institute published ``Do Minority-Owned
Businesses Get A Fair Share Of Government Contracts,'' its survey of
the results of numerous state and local disparity studies. The Urban
Institute found generally that ``minority-owned businesses receive far
fewer government contract dollars than would be expected based on their
availability,'' and made extensive findings similar to those published
in the Federal Register. The appendix to the procurement reform
proposal, and the Urban Institute's study, demonstrated that a
compelling interest warranting race-conscious efforts in federal
procurement remains.
Mark L. Gross,
Deputy Chief, Appellate Section, Civil Rights Division.
[FR Doc. 97-12190 Filed 5-8-97; 8:45 am]
BILLING CODE 4410-13-P
