March 5, 2002
Re: Minority Set Asides
Dear Sir,
You have asked whether an agreement between your city and a developer of a large
construction project may specify a percentage of subcontracts on the project to be awarded, or
set aside, for minority contractors. I believe such an agreement would be subjected to the same
scrutiny as an ordinance or practice by the city itself in setting aside contracts for award to
minority owned businesses, and caselaw reveals that it is very difficult, if not impossible, for such
practices to pass constitutional muster.
In all of the cases in which minority set asides have been examined by the United States
Supreme Court and the Sixth Circuit Court of Appeals, city actions in setting aside a portion of
public contracts for award to minority owned businesses, or to contractors which employ a
minimum percentage of minority workers, the court has either found such practices to be
unconstitutional, or has remanded cases to lower courts with instructions to apply tougher
standards in evaluating the issues, leading the lower courts to reach the same conclusion.
The courts have not stated that such practices are per se unconstitutional, but have established
a very tough test to be applied to when set aside programs or practices are challenged in court,
under which all have been found unconstitutional. Such programs are reviewed applying the
following:
1. Skepticism: “Any preference based on racial or ethnic criteria
must necessarily receive a most searching examination.”
2. The standard of review does not depend upon the race of those
burdened or benefitted; and
3. “Congruence”- that is, strict scrutiny applies whether the claim
concerns a state, federal or local program.
Applying such standard of review, the program must meet two basic
requirements:
1. The government must make a legitimate and
supportable findings of fact that it is guilty of past
racial discrimination in the awarding of contracts
to minorities.
2. The minority set-aside program must be “narrowly
Tailored” to achieve a compelling government interest
(the ending of past or present discrimination).
Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097, 2111 (1995); City of Richmond v. Croson
Co., 109 S.Ct. 706 (1989).
In Associated General Contractors of Ohio, Inc. v. Drabnik, 214 F.3d 730 (6th Cir. 2000), the
Sixth Circuit Court of Appeals struck down Ohio’s Minority Business Enterprise Act, in language
which indicates that any minority set-asides in Tennessee would have to meet the tough
constitutional standards announced in Croson and Adarand above.
Although it is possible to provide for minority set-asides, it is a very difficult and complex task to
establish a program or practice which will be upheld in court. The City of Knoxville has
established an “Equal Business Opportunity Program” setting up a committee of city employees
and citizens to develop a program to achieve the goal of increasing the participation of minority
and women-owned businesses to provide services and products to local government. Although
the committee has a stated goal of increasing the percentage of contracts awarded to minorities
and women, I am not aware of any ordinance or resolution adopting a program outlined by the
committee to achieve the goal. It appears that Knoxville is focusing on recruitment and
education of minority contractors, and encouraging participation in the bidding process.
I hope this information is helpful. Please let me know if you need any further research or
analysis of this issue.
Thank you for consulting with MTAS.
Sincerely,
Melissa A. Ashburn
Legal Consultant