Baltimore Mayor Catherine Pugh recently signed an executive order adding LGBTQ businesses to those eligible to receive special consideration in the awarding of city contracts. Although the Baltimore Sun criticized Pugh for the way she went about it––failing to conduct a study first to justify the need, this incident is a good opportunity to re-examine the justification for these programs.
In 1989, the U.S. Supreme Court declared such programs unconstitutional if they are not based on a “disparity study,” showing each group is actually being discriminated against. In that decision Justice Sandra Day O’Connor wrote “The dream of a Nation of equal citizens in a society where race is irrelevant to personal opportunity and achievement would be lost in a mosaic of shifting preferences based on inherently unmeasurable claims of past wrongs.” Her concern speaks to what has happened since––namely, programs run on slim justification haunted by occasional cheating and a burden on taxpayers
Business ownership is fungible. Instances have been uncovered where a woman or minority was named owner of a company solely for the purpose of being placed on the approved list when the true owner was neither. One infamous case involved a man who identified as Navajo moving from Arizona to Maryland for the express purpose of becoming the “owner” of a company that he never owned. (See https://www.washingtontimes.com/news/2010/jul/27/minority-contract-set-aside-program-exploited/)
In addition to minority set asides, some states have small business set-asides. Combining all these programs leaves few opportunities for older companies that might have more to offer on the basis of experience and capital. The result is likely to mean work not done on time or at the desired level of quality and it can cost taxpayers more.
Another potential problem with these programs is setting the percentage of contracts that are to be awarded to minority-owned companies. The rational for a specific percentage ought to be based on current practices as well as the percentage of minority and women owned companies that are eligible to participate. Those numbers are likely to change from year to year and thus regular testing seems to be necessary to avoid favoritism and the exclusion of companies from bidding simply because they are not minority owned.
What O’Connor questions is whether the jurisdictions that offer these programs have the resources to evaluate the qualifications of the applicants and the quality of their work. Does adequate vetting taking place to determine whether a minority company has the management leadership, workforce experience, and capital to undertake the project?
Do they properly monitor minority contract winners to determine that they are carrying out their work in a proper manner, successfully achieving the expected results in the mandated time period?
There are dozens of opportunities for these programs to fail. The intent may be good, but does the results match the expectation?
Finally, do these programs bring us any closer to the day when such programs are no longer needed? I have my doubts. It seems that government bureaucracies generate built-in inertia in matters such as this. It is to the advantage of the employees in the offices that manage these programs to justify the need for their continuation and to overlook any discrepancies in a company’s application in order to give the mayor or governor numbers to show she or he is doing a good job.
A good way to avoid exchanging problems based on discrimination with ones reflecting poor oversight and poor work quality would be to sunset the programs, requiring a diversity study every two or three years before they are renewed.