'Set-asides' will take brunt of court ruling

June 14, 1995|By Thomas W. Waldron and Sandy Banisky | Thomas W. Waldron and Sandy Banisky,Washington Bureau of The Sun Sun staff writer Michael James contributed to this article.

WASHINGTON -- In tightening the rules for federal affirmative action, the Supreme Court this week threatened the future of dozens of government programs dealing with everything from science scholarships to Navy computer contracts to businesses selling snacks in airports.

In all, the federal government spends an estimated $10 billion for affirmative action programs scattered across nearly every federal agency.

In a 5-4 decision issued Monday, the Supreme Court ruled that federal affirmative action programs must meet a stiff legal test to be considered constitutional. Ruling on a case stemming from a federal highway contracting job in Colorado, the court said affirmative action programs must meet a compelling governmental need and must be narrowly tailored to meet that need.

President Clinton, who had already ordered a government-wide review of affirmative action, said yesterday that the court had made it harder, but not impossible, to craft programs to assist minorities.

"The Supreme Court has raised the hurdle, but it is not insurmountable," Mr. Clinton said in his first public reaction to the court's ruling. "The constitutional test is now tougher than it was, but I am confident that the test can be met in many cases."

"I think it pretty well does away with minority set-asides by government agencies," said Barbara Mello, a constitutional law professor at the University of Baltimore School of Law. "I would say this is just the beginning."

Other court observers said it's too soon to assess the ruling's force and that it will take years of litigation before the impact is known.

University of Baltimore constitutional law professor Michael Meyerson said Monday's ruling "certainly shows a disfavor against affirmative action programs." But, he said, "the court is going out of its way to leave open the possibility that this program and other programs will be upheld."

Across government yesterday, officials were studying the decision to see how it might apply to their own programs.

The ruling would appear to have the most direct impact on set-aside programs in which the government steers a percentage of its purchases to firms owned by minorities or women.

$4.4 billion in set-asides

The Small Business Administration, acting on behalf of many government agencies, awarded $4.4 billion in set-aside contracts 2,200 minority-owned firms in 1994, according to the U.S. General Accounting Office.

"The program makes it easier in the initial stages for contractors to get enough revenue base, enough business to develop your management team, your technology team, to develop some competitive ability," said Fernando Galaviz, the Latino owner of an Arlington, Va., computer firm and vice chairman of a national association of minority-owned government contractors.

"There is no question that the large majority of firms would never have had an opportunity to even start the business if it weren't for the assistance of the program," Mr. Galaviz said. His own firm relies on federal contracts for about 80 percent of its business, he said.

The vast majority of SBA contracts were awarded without competitive bidding, the GAO said, and firms remain eligible for the SBA's so-called 8(a) program for up to nine years.

In a similar program, the Department of Defense seeks to award at least 5 percent of its contracting work to minority-owned businesses. Last year, the Pentagon awarded more than $6 billion to such firms, about half of it through the SBA.

Several contractors who have taken advantage of government programs said the ruling could be devastating.

Roosevelt J. LaBoo, president of DSI Enterprises, a downtown Baltimore construction firm that depends on federal affirmative action programs for 40 percent to 50 percent of its business, called the Supreme Court decision "a disastrous blow for minority contractors."

"The Supreme Court is going back to the future. The job economy starts to get scary and they take it out on the minorities," he said. "The majority of businesses in this country are not affected by the little bit of money that is set aside for these programs."

"The program was only beginning to help level the playing field, and now they're trying to destroy it."

Telecommunications

The Supreme Court decision may threaten preferences that minority-owned businesses have enjoyed in telecommunications.

Minority-owned firms, for instance, are given a boost through "qualitative enhancements" when competing against other applicants for an license from the Federal Communications Commission.

Similarly, minority companies benefit from a 25 percent discount on the prices they bid for potentially lucrative wireless frequencies during auctions conducted by the FCC.

Those firms that were successful bidders were also given an extended and more favorable interest rate for paying for the frequencies.

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