Race-based classifications and gender-based classifications in government disadvantaged business enterprise programs are inherently suspect.
This responds to your recent letter requesting an opinion "as to the legality of the criteria which Grady Hospital uses to award contracts." While the information attached to your letter states that the "Grady Evaluation System gives a 30% advantage to black and female contractors," no specific information is provided regarding how such "30% advantage" was developed. In any event, this opinion is limited to a discussion of the applicable legal principles to be considered in determining the constitutionality of government disadvantaged business enterprise ("DBE") programs. Ultimately, the question you have raised can only be answered with finality in the courts.
Racial classifications in government programs are inherently suspect and are reviewed under a strict scrutiny standard. Adarand Constructors, Inc. v. Pena, U.S. , 115 S. Ct. 2097 (1995); City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989). Racial classifications are adjudged constitutional under the strict scrutiny standard "only if they are narrowly tailored measures that further compelling governmental interests." Adarand, 115 S. Ct. at 2113.
Therefore, the first step in reviewing race-based classifications in DBE programs is to determine the compelling governmental interest served. If the compelling governmental interest is to remedy the effects of past racial discriminatory conduct, the discrimination must be identified with specificity, and there must be a strong basis in evidence of such past discrimination. See Shaw v. Hunt, U.S. , 116 S. Ct. 1894, 1902-03 (1996); Croson, 488 U.S. at 500, 510; Brooks v. State Bd. of Elections, 848 F. Supp. 1548, 1570, remanded and appeal dismissed as moot, 59 F.3d 1114 (11th Cir. 1995); and American Subcontactors Ass'n, Ga. Chapter, Inc. v. City of Atlanta, 259 Ga. 14 (1989) (finding evidence offered by the City of Atlanta inadequate to justify the City's Minority and Female Business Participation Program under strict scrutiny). Evidence of general societal discrimination is not sufficient to sustain a race-based classification program. Shaw v. Hunt, supra.; Croson, 488 U.S. at 499, 505-06; Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 276 (1986). Unless the involved government institution has been a passive participant in attendant private discrimination, the evidence must establish discrimination by the institution itself (in this case, Grady Memorial Hospital). See Croson, 488 U.S. at 492 ("if the city could show that it had essentially become a 'passive participant' in a system of racial exclusion practiced by elements of the local construction industry, . . . the city could take affirmative steps to dismantle such a system"); and Hopwood v. Texas, 78 F.3d 932, 950 (5th Cir. 1996) ("the state's use of remedial racial classifications is limited to the harm caused by a specific state actor").
Generally, DBE programs are developed from anecdotal and statistical evidence of discrimination collected in a "disparity study" performed by private consultants for the government institution. The validity and reliability of such statistical data and anecedotal testimony has been rigorously examined by federal courts in recent decisions. See Associated Gen. Contractors of Am. v. City of Columbus, 936 F. Supp. 1363 (S.D. Ohio 1996); and Engineering Contractors Ass'n of South Fla., Inc. v. Metropolitan Dade County, 943 F. Supp. 1546 (S.D. Fla. 1996). In the City of Columbus case, the court found that "[t]he city's investigation of anectodal evidence of discrimination was poorly executed." City of Columbus, 936 F. Supp. at 1373. The court also observed that "[t]he city's consultants, chosen without competitive bidding, were not impartial investigators, but aggressive advocates of minority set aside legislation as were some of the most vocal witnesses." Id. In the Metropolitan Dade County case, the court conducted a comprehensive examination of the defendants' statistical evidence and determined that "the accuracy and the validity of the County's statistical evidence fails to form a strong basis in evidence for the conclusion that discrimination has occurred in the Dade County construction industry." Metropolitan Dade County, 943 F. Supp. at 1577. In light of these cases and the fiduciary responsibilities of government officials, government institutions should exercise careful oversight over any disparity study conducted in support of a DBE program.
If the disparity study sets forth a strong basis in evidence of past racial discrimination, then the second step in reviewing race-based classifications in a DBE program is to determine if the program is specifically and narrowly tailored to accomplish the remedial purpose. Adarand, 115 S. Ct. at 2117. In order to determine the fit between the remedial purpose and the DBE program, certain factors should be considered, i.e., (1) the necessity for the relief and the efficacy of alternative remedies; (2) the flexibility and duration of the relief, including availability of waiver provisions; (3) the relationship of numerical goals to the relevant labor market; and (4) the impact of the relief on the rights of innocent third parties. Ensley Branch, N.A.A.C.P. v. Seibels, 31 F.3d 1548, 1569 (11th Cir. 1994).
With respect to gender-based classifications in government DBE programs, the judicial standard of review at least approaches the standard of review for race-based classifications. See United States v. Virginia, U.S. , 116 S. Ct. 2264, 2267 (1996) ("[p]arties who seek to defend gender-based government action must demonstrate an 'exceedingly persuasive justification' for that action"). Therefore, gender-based classifications in DBE programs which are designed to remedy the effects of past discriminatory conduct should be based on compelling evidence of sex discrimination. Under the level of intermediate scrutiny which has been applied in the review of gender-based classifications, the classification must serve important governmental objectives and the discriminatory means employed must be substantially related to those objectives. Ensley Branch, N.A.A.C.P., 31 F.3d at 1579-82.
The central purpose of the Equal Protection Clause "is to prevent the States from purposefully discriminating between individuals on the basis of race." Shaw v. Reno, 509 U.S. 630, 642 (1993). Therefore, race-based classifications must receive a "most searching examination to make sure that [they do] not conflict with constitutional guarantees." Wygant, 476 U.S. at 273-74 (internal quotations and citations omitted). Racial quotas for state and local government contracting have been declared to be "a presumptively illegal practice, reserved for extreme situations, where every constitutional 'i' is dotted, and every constitutional 't' is crossed." Metropolitan Dade County, 943 F. Supp. at 1556. While the evidentiary and judicial review standards may be somewhat less stringent for government gender-based classifications, any evidence of past sex discrimination underlying a DBE program must be genuine and convincing. See Virginia, 116 S. Ct. at 2275 ("[t]he burden of justification is demanding and it rests entirely on the State"). Thus, government DBE programs employing race-based or gender-based classifications should be developed and implemented deliberately and cautiously, with careful attention given to the underlying evidence and the means used to remedy any effects of past discrimination.
DANIEL M. FORMBY
Deputy Attorney General