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“DEPARTMENT OF JUSTICE SURVEY ON REMEDYING THE EFFECT OF DISCRIMINATION IN FEDERAL CONTRACTING” mentioning the U.S. Dept. of Justice was published in the in the Extensions of Remarks section section on pages E619-E620 on June 14.
The Department is one of the oldest in the US, focused primarily on law enforcement and the federal prison system. Downsizing the Federal Government, a project aimed at lowering taxes and boosting federal efficiency, detailed wasteful expenses such as $16 muffins at conferences and board meetings.
The publication is reproduced in full below:
DEPARTMENT OF JUSTICE SURVEY ON REMEDYING THE EFFECT OF DISCRIMINATION
IN FEDERAL CONTRACTING
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HON. CAROLYN B. MALONEY
of new york
in the house of representatives
Tuesday, June 14, 2022
Mrs. CAROLYN B. MALONEY of New York. Madam Speaker, I include in the Record the executive summary of a report by the Department of Justice
(DOJ) titled ``The Compelling Interest to Remedy the Effects of Discrimination in Federal Contracting: A Survey of Recent Evidence.'' The DOJ summary and associated report illustrate how systemic discrimination continues to create barriers for women- and minority-owned businesses to fairly compete for federal contracts and how federal contracting programs can respond to, address, and remedy the harmful effects of discrimination.
The Compelling Interest To Remedy the Effects of Discrimination in
Federal Contracting: A Survey of Recent Evidence--Executive Summary
On January 27, 2022, the Department of Justice posted a notice in the Federal Register announcing the publication of a Department of Justice report surveying the evidence supporting the use of race- and sex-conscious contracting programs by the federal government in order to remedy the effects of discrimination.
This report is third in a series created by the Department of Justice since the Supreme Court determined that federal race-conscious contracting programs must meet the strict scrutiny standard of review to survive a constitutional challenge based on the Equal Protection Clause in Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995). Each report has compiled and summarized the evidence of discriminatory barriers that businesses owned by women and people of color face that impede participation in government contracting. Both previous reports have been cited in federal court as evidence that there is a compelling governmental interest in programs that support the ability of businesses owned by people of color to compete on an equal basis. Strict scrutiny is the most exacting standard of review, and it requires, among other things, evidence supporting the conclusion that such measures are necessary to further the compelling governmental interest in remedying the effects of past and present racial discrimination. If a program contains affirmative measures based on sex, those measures are subject to the somewhat lower standard of intermediate scrutiny. That standard demands that any gender-based preference be substantially related to an important governmental objective.
In assessing whether race- and sex-conscious government contracting programs could continue to survive heightened levels of judicial review, the Department of Justice reviewed hundreds of state and local disparity studies, dozens of congressional hearings and related testimony, government reports on public contracting, academic and expert reports on public and federal contracting, academic and government reports on financial data related to small businesses, and recent case law related to Equal Protection challenges to government contracting and grant programs. The disparity studies, congressional hearings, and academic reports contain both quantitative and qualitative evidence of the persistence of discrimination and its lingering effects in the public and private sector.
The Department of Justice report determines that there is a strong basis in evidence, both quantitative and qualitative, of the continued pervasiveness of discriminatory barriers that impede the full and fair participation of businesses owned by women or people of color in government contracting. The evidence discussed in this report supports the compelling interest in the continued use of federal programs that contain remedial measures to eliminate discriminatory barriers to contracting opportunities for businesses owned by minorities and an important state interest in the continued use of federal programs that contain remedial measures to eliminate discriminatory barriers to contracting opportunities for businesses owned for women.
Both the qualitative and quantitative evidence shows the various ways discrimination hinders the ability of minority- and women-owned businesses to compete equitably for government contracts. While this discrimination can take many forms, primary obstacles include: (1) discrimination limiting access to capital; (2) discrimination by procurement agencies and prime contractors, (3) exclusion from business networks, and (4) discrimination in lending and by bonding companies and suppliers.
In assessing the current public contracting environment faced by minority- and women-owned businesses, the Department of Justice reviewed over 200 disparity studies from state and local jurisdictions in 34 different states and the District of Columbia. Disparity studies are quantitative demographic analysis of public procurement contracting utilization as compared to local business availability categorized by the race or sex of the owner. The review of these studies shows that there continues to be substantial disparities between the availability of minority- and women-owned businesses and the utilization of such businesses in state and local government procurement in all areas of the country and at all levels of procurement. The overwhelming majority of these studies showed significant under-utilization of minority- and women-owned businesses in almost every sector of public procurement. The report cited to an overview of these disparity studies conducted by the Minority Business Development Agency in 2016, which found that the studies indicated significant contracting disparities for minority business enterprises that were pervasive across different ethnic and racial groups, industries, and geographies. Shockingly, the median value for the observed disparities was just 19%, indicating that minority businesses were being utilized at less than one-fifth of their availability in a given marketplace.
The report also reviewed federal government small business contracting. In 2017, just 9.8% of federal spending on contracts went to minority-owned businesses. The same year, woman-owned businesses received only 5% of federal prime contract awards. Even when comparing businesses and controlling for the industry in which the firm did business, business age, business size (both in terms of average number of employees and annual receipts), business form, and security clearance, the likelihood of minority-owned businesses receiving a federal contract versus similar businesses is still lower than non-minority-owned businesses.
Overwhelmingly, the disparity studies and reports also present evidence linking disparities in contracting to discriminatory factors. In the private financial sector, historic barriers and private discrimination has limited the ability of minority business owners to accumulate assets and wealth. Minority-owned businesses are two to three times more likely to be denied credit, more likely to avoid applying for loans based on the belief they will be turned down, and more likely to receive smaller loans and pay higher interest rates on the loans they do receive. Minority- and women-owned firms not only receive smaller loans at higher interest rates than firms owned by White males, but they also get smaller equity investments.
In the bonding arena, both quantitative and qualitative evidence shows that bonding requirements disproportionately affect businesses owned by women or people of color. 83% of minority- and women-owned businesses identified bonding requirements as a specific barrier to the ability to obtain contracts. A number of recent studies show that minority- owned firms are significantly more likely to face difficulties in obtaining required bonds compared with majority-owned firms.
The evidence presented in the report indicates that the barriers that have impeded the growth and success of minority- and women-owned businesses continue to exist and that government contracting preference programs ameliorate the effects of public and private discrimination. For example, a 2017 disparity study prepared for the Los Angeles County Metropolitan Transportation Authority compared the participation of minority- and women-owned businesses on contracts that contained goals to encourage utilization of minority- and women-owned businesses as opposed to contracts that did not contain such goals. The results showed that on contracts without goals, minority- and women-owned firms earned only 53 cents on the dollar, but on contracts with goals, such firms earned 96 cents on the dollar--almost what would be expected given the availability of such firms in the marketplace.
The federal government currently operates two main contracting programs with race and/or sex-conscious elements: the SBA Section 8(a) business development program and the Department of Transportation Disadvantaged Business Enterprise program. All federal departments and major independent agencies participate in the SSA's Section 8(a) business development program, which offers a variety of assistance, including set-aside federal government contracts to socially and economically disadvantaged businesses. In Fiscal Year 2019, the federal government awarded $30.4 billion to 8(a) firms.
Appendices of 219 state and local disparity studies, 45 relevant academic and government studies, and 28 Congressional hearings are included with the report. The Federal Register notice announcing the report may be found at 87 FR 4955, and the report itself is publicly available at the Department of Justice.
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