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The end of minority contracting in Chicago?

In the good old days, I knew tons of guys who would bring in a minority partner and form a "minority" owned contracting company to get City and State business. Why? Because the politicos legislated statutes requiring a large percentage of the work be done by minorities.

Did people game the system? Haha.

Sadly I wasn't one of them, because I identify as a member of the Tribe from Highland Park.

Affirmative Action in Contracting Faces Legal Peril

San Francisco lawmakers declared themselves guilty of discrimination so they could discriminate more.

By Judge Glock, WSJ

July 25, 2023 6:23 pm ET

In Students for Fair Admissions v. Harvard, the Supreme Court held that “racial balancing” was “patently unconstitutional,” and that affirmative action has to have a “logical end point.” There’s been a lot of commentary about how that will apply to employment law but less about another program of racial discrimination: favoritism to racial minorities in government contracts.

Yet Fair Admissions is already affecting this area of law. Last week Judge Clifton Corker struck down minority contracting preferences at the Small Business Administration and U.S. Department of Agriculture on grounds that existing requirements have little justification and “no logical end point.”

Minority contracting requirements have had deleterious effects on almost every aspect of government for decades. They have cost taxpayers countless billions, degraded government services, and deepened racial divisions. Almost a tenth of the American economy goes through government contracts, which involve everything from building submarines to installing software. Federal, state and local governments have set goals for percentages of these contracts that should be awarded to minority-owned businesses. To hit the goals, government officials can “set aside” contracts for minority firms, offer no-bid deals to minority contractors, or select minority contractors with higher bids than competitors.

Because of current racial obsessions, the scale of such favoritism is increasing. The federal government has awarded about 10% of its available contracts to minorities, but President Biden announced that he wanted to increase that to 15% by 2025. New York City and state have set goals of 30% of contracts going to businesses owned by minorities or women. Mayor Eric Adams has demanded more no-bid contracts.

The price of these programs is substantial. A 2009 study looked at highway costs after California voters banned consideration of race in government programs in the 1990s. It found that costs fell 5.6% relative to federally funded projects, in which racial contracting goals still applied. Other research shows these requirements increase cost overruns and delays.

Minority contracts also encourage fraud. White contractors often use minority “front companies” to win contracts, then pay a small fee to the purported owner. Minority contractors often use bribes to keep getting special government solicitude. There is a steady drumbeat of indictments based on these programs.

In Richmond v. Croson (1989) and Adarand Constructors v. Pena (1995), the Supreme Court said that government could use minority contracting programs only under rare circumstances and to remedy past discrimination. Instead of adhering to these rulings, governments have fostered an industry of “disparity studies” firms. Governments pay these contractors—themselves often minority-owned—hundreds of thousands of dollars to tell them they’ve been discriminating against minorities in contracting.

Governments then use disparity studies’ findings to show courts why they must discriminate in novel ways. As the California Supreme Court noted in a 2010 ruling, the City of San Francisco issued legislative findings that it was still “actively discriminating against women and minority groups in its contracting.” Rather than simply stop discriminating, the city claimed it was justified in discriminating in favor of women and minority groups.

In Fair Admissions, Chief Justice John Roberts cited Croson and Adarand six times to highlight the problems with all forms of racial discrimination. Today’s minority-contracting programs should fall under the standards the court set forth. As Judge Corker observes, Fair Admissions “concerned college admissions programs, but its reasoning is not limited to just those programs.”

Today, minority contracting engages in explicit racial balancing. New York City’s code demands that Hispanics get 8.99% of professional-services contracts and Native Americans get 0.65%. It is difficult to claim these programs are necessary to remedy past discrimination when they have been going on for decades. They still have no “logical end point.”

Minority contracting was always an inappropriate way to remedy America’s history of racial injustice. It has favored a few connected businesses, encouraged fraud, burdened taxpayers with poor and expensive services, and further divided Americans. The justices should, and surely will, take another look.

Mr. Glock is director of research at the Manhattan Institute and author of “The Dead Pledge: The Origins of the Mortgage Market and Federal Bailouts, 1913-1939.”

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