The price of discrimination: set-asides may die soon, now that officials are being held liable

IN 1989, the Supreme Court issued a landmark decision that appeared to signal the end of racial preferences in public contracting. In City of Richmond v. Croson, a plumbing company (Croson) had successfully bid to install toilets in the city jail. Richmond (like many local governments) required that 30 percent of its construction spending go to minority subcontractors. When Croson failed to find a minority-owned subcontractor for the job, the city rebid the contract, prompting Croson's suit. Overturning set-asides like Richmond's, the justices noted the role of racial politics in creating such programs and set an extremely high threshold for their continuance. Indeed, in the ensuing years, plaintiffs won 24 of 25 cases against state and local business preference programs.

Still, like kudzu, preferences have proved difficult to eradicate. Masked by evasive terminology and justified by tendentious studies, minority business set-asides persist. Politicians know that lawsuits against such programs are costly and time-consuming, and they are not above retaliating against firms with the temerity to sue. And if the government loses after years of litigation, the taxpayers cover the legal fees.

Now that calculus may change, because a federal judge in Miami has just given the victims of preferences an important new tool. On November 10, the governing board of the South Florida Water Management District ($792 million budget) recommended ending its two-decade-old contracting preference program, even though there was no pending litigation. Board members had become worried about being held personally liable for implementing the program. The source of their concern was a new federal ruling.

The case that got the board's attention is Hershell Gill Consulting Engineers v. Miami-Dade County. Gill is a small firm with fewer than a dozen employees earning about $1 million annually. While most of its work is in the private sector, the company wanted the opportunity to contract with Dade County. However, Gill Engineering is owned by a white male, and the county required that at least 42 percent of the dollars awarded in architecture and engineering contracts go to blacks, Hispanics, and women. The policy severely disadvantaged Gill.

Dade County's contracting preferences began in the 1980s. In 1996, the county lost an expensive case about construction preferences, but preserved preferences in all other purchase areas. By 1998, the county manager and the county attorney's office recommended that preferences be abandoned in architecture and engineering contracts because "parity" for the favored groups had been reached. Because of Florida's sunshine laws this recommendation was broadcast on cable television. The county commissioners, however, twice rejected the recommendation and refused to modify the program.

The commissioners then decided they needed a new consultant's study to justify the policy they wanted to preserve. (In theory, a showing that the county engaged in systemic discrimination might justify remedial preferences.) So a new study was churned out at significant expense to the county's taxpayers. This study was so badly flawed that its author admitted at trial, "We do have some problems in the data." As Judge Adalberto Jordan wryly concluded, that admission, "in my view, is a vast understatement."

Worse than the data deficiencies, the court concluded, was the fact that the study "fails to identify who is engaging in the discrimination, what form the discrimination might take, at what stage in the process it is taking place, or how the discrimination is accomplished." Consequently the court issued an order in 2000 ending the county's racial and gender preferences in architecture and engineering contracts.

But other county preferences remained, and the plaintiffs asked the court to hold the commissioners personally liable for their persistent willingness to discriminate against white-owned firms. During the Gill trial each commissioner was called to testify about why the commission had continued the county's discriminatory program in the face of professional advice that such conduct was not legally defensible. There is a history behind this tactic: At key moments during the civil rights movement, the threat of personal liability was used to force school boards and voting registrars to quit discriminating. Now a court was being asked to use the same tool when the victims were white.

Having shut down the preference program, Judge Jordan waited four more years to rule on the liability issue. He solved the problem of traditional judicial deference to legislative autonomy by finding that the commissioners could not be held liable for enacting an unconstitutional program, but that in their role as approvers of individual contracts the commissioners were taking on an administrative role. They could thus be held liable for discriminatory conduct when they took that action. "The Commissioners are not entitled to qualified immunity and are liable for any compensatory and punitive damages in their individual capacities," the judge held.

The court was no doubt influenced by the undisguised spoils system it found in Dade County. A majority of the commissioners are Hispanic. "It is probably not happenstance," the court concluded, "that Hispanics receive the highest" set-aside: 25 percent. Women are a majority of the county's population and come close to forming a majority on the commission. "Again, not surprisingly," the judge declared, "women have the second-highest" goal. Blacks represent a minority on the commission; "not coincidentally, they get the lowest" goal, 12 percent. Only one member of the county commission was a white male and, of course, no goals were established for the benefit of companies owned by white males.

What also impressed the court was the failure of the county to take seriously its own 1997 antidiscrimination ordinance. No witness could point to a single complaint brought under the law through the years. As the court said, this absence of complaints meant either that the ordinance was not being enforced or there was no discrimination in the county's contracting process. Either way, there was no justification for the preference program. In the end, the court decided not to levy damages against the commissioners for their past conduct. But Judge Jordan warned that in the future, if preferences were used and the record were as deficient as it was in Gill, the "consequences will be severe" and "punitive damages will be a virtual certainty."

Perhaps this time the Dade commissioners got the message. The county decided not to appeal the court's decision and the county attorney has advised the commissioners to get out of the business of racial preferences in public contracting. That's sound advice. The Gill decision has damaged preferences permanently. Few local governments have antidiscrimination ordinances that are enforced effectively. Few have evidence that discrimination is taking place. Many preferential contract programs were established through racial politics every bit as blatant as Dade County's. And local administrators of preference programs are now on notice: They are no longer merely flouting the Constitution; they're putting their own assets at risk.

Gill will likely have a ripple effect on preference programs of all kinds across the country. The South Florida Water Management District is only the first Gill casualty. If the people who approve preferences on public contracts have to reach into their own wallets to pay for their unconstitutional behavior, few, if any, of these programs will survive.

John Sullivan and George La Noue are associate director and director of the Project on Civil Rights and Public Contracting. They teach civil rights law at the University of Maryland Baltimore County and worked on the Gill case.

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