Is Adarand Disadvantaged?

Article December 28, 2000
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Adarand Constructors Inc. continues to make news and raise the
most interesting legal issues associated with the U.S. DOT's
Disadvantaged Business Enterprise (DBE) program. As readers are
aware, in 1995 the U.S. Supreme Court held that all programs
imposing race-based classifications must be adjudicated under
the "strict scrutiny" standard and that such classifications are
constitutional "only if they are narrowly tailored measures that
further compel government interest." In my July 1995
column(Adarand Decision: What is the Impact?), I discussed the
Supreme Court's ruling at length and advised readers that the
Supreme Court had remanded the case for further findings by the
lower courts.

In a decision dated June 2, 1997, a U.S.
District Court judge in Colorado made the first ruling on the
remand. He ruled that Congress had a strong basis and evidence
for enacting the DBE statutes (a victory for proponents of the
DBE program), which thus serves a "compelling governmental
interest." He further ruled that the Federal Highway
Administration's (FHWA) race-conscious Subcontracting
Compensation Clause (SCC) program is unconstitutional because it
is not "narrowly tailored" to serve the "compelling government
interest" (a victory for the opponents of the DBE program).
Because of that ruling, the court noted that its lengthy
discussion of "compelling government interest" may be considered
as "obiter dictum" (words of an opinion entirely unnecessary for
the decision of the case).

Presumption of disadvantage

The court noted that under the strict scrutiny test, the use of
race to award federal contracts must be "narrowly tailored" to
serve a "compelling interest." Even though the court concluded
that Congress need not make state-to-state nor city-to-city
findings of discrimination before it can find a "compelling
interest" in eliminating documented discriminatory barriers, the
lack of such localized findings necessarily requires that
Congress exercise particular care in ensuring that its programs
are "narrowly tailored." The judge stated that he found it
difficult to envisage a "narrowly tailored" race-based
classification because by their very nature, such programs are
over inclusive for members of minority groups, while under
inclusive by excluding Caucasian members and other non-minority
groups. On that basis, the judge concluded that the programs
using the presumption of disadvantage are not "narrowly
tailored" to serve the interest of eliminating discrimination in
the construction industry.

After the court's decision,
Adarand filed a separate suit against the governor of the state
of Colorado and the director of the Colorado DOT, the Colorado
DOT, and the state of Colorado seeking a declaration that the
state DBE program is unconstitutional based on the judge's
ruling in the FHWA case.

Not unexpectedly, the United States
filed a motion to intervene in Adarand's suit alleging that it
would be harmed if not permitted to intervene because the
complaint and motion for a preliminary injunction both
threatened the use of federal funds by the Colorado DOT (CDOT),
and the DBE requirements placed on those funds by U.S. DOT and
Congress. The same Colorado Federal District Court judge who had
one month earlier ruled that the FHWA's subcontracting program
was not "narrowly tailored" denied the United States' motion for
intervention. He found that the United States' arguments were
"fatuous" and "fallacious."

The next interesting development
in the Adarand saga occurred when the Colorado attorney general
advised the governor that she would be "unable" to represent the
state. At that point, Gov. Romer hired outside counsel,
prompting interesting editorials in the Colorado newspapers.

Catch-22

On Friday, July 25, 1997, the judge was supposed to
rule on Adarand's request for an injunction that would have
halted the CDOT's DBE program. After a build-up by the media,
the judge ducked the main issue by concluding that Adarand's
owner, Randy Pech, has been and presently is "disadvantaged"
because he's been the low bidder and not received the award of
the contract in the past. Because Adarand's owner was
"disadvantaged" the judge reasoned he no longer had standing to
challenge the CDOT DBE program.

Needless to say, the judge's
ruling prompted more interesting articles and editorials. A
Rocky Mountain News editorial dated Aug. 2, 1997 noted that by
carrying the idea of preferences to its logical conclusion, the
judge had reduced it to an absurdity. "Its the perfect
contractor's Catch-22; every business not otherwise
disadvantaged is disadvantaged by the fact that its competitors
get favored treatment."

Writers speculated that the judge's
ruling will prompt other non-DBE specialty subcontractors to
either apply for DBE certification with their state DOT on the
basis that they can show specific examples of discrimination;
or, alternatively file suit against the states where they have
been denied subcontracts, seeking to end the DBE program. I am
anxious to see how many non-DBE specialty subcontractors apply
for DBE certification in their state.

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