Washington Report: leveling the field

Black Enterprise, Oct, 1998 by Joyce Jones

Clinton's new rules offer 10% price credit to minority firms

For three years, the black business community has waited patiently for President Clinton to honor a vow to "mend, not end" affirmative action. It was in 1995 that the Adarand vs. Pena ruling crippled government efforts to secure federal contracts for minority businesses by declaring minorities could only be awarded preferences to correct specific instances of past discrimination. And that ruling was only the beginning of efforts to gut affirmative action. Since then, wave after wave of anti-affirmative action legislation has made its way across Capitol Hill. But, finally, there's some welcome news. This past June, the administration presented its collection of redesigned federal procurement guidelines. They met with mixed reviews and, until they withstand court challenges, an uncertain future.

As of October 1, 1998, the federal government will provide a 10% price credit to bids from small disadvantaged businesses (SDBs) in industries where it's been determined that racial discrimination still exists. In a nutshell, the new rulings will allow minority businesses in preselected fields--among them construction, transportation and communications--to bid as much as 10% higher on a federal contract but still win that contract as its lowest bidder. By definition, small businesses headed by African Americans fall within the SDB category.

Already in effect at the Department of Defense, the credit doesn't ensure a bid's success, but "we believe it will give minority businesses a significant boost," says Edward Correia, White House special counsel for civil rights. Incentives to encourage larger corporations to use SDBs as subcontractors are being developed to go into effect on January 1, 1999.

The price credits will have the greatest impact on industries with "procurements that are price-sensitive. Under new guidelines, contracting officers will be able to award contracts to SDBs if the industry is one where credits are available, the firm is able to do the work and the firm's bid is within 10% of the fair market value of the contract," says Richard Hayes, Small Business Administration associate deputy administrator for government contracting and minority enterprise development.

In a process called "benchmarking," the Department of Commerce, using fiscal year 1996 data supplied by federal agencies including the Census Bureau, analyzed 72 business sectors. Using this information, the department tabulated the dollar amount of contracts that SDBs actually won compared with what they should have won given their presence, age and size in a particular market.

As a result, approximately 74% of federal contract dollars awarded to SDBs will now be eligible for price credits. They won't be offered in industries where the data indicate that minority and disadvantaged businesses are doing relatively well, such as in food product manufacturing, explains Hayes. While the 6,100 companies that currently participate in the 8(a) program will be grandfathered into the process, Hayes estimates that more than 30,000 companies will potentially be eligible for the program.

"To the degree that we're able to successfully defend these programs, this is probably the best legally defensible program that could be developed," says Anthony Robinson, president of the Minority Business Enterprise Legal Defense and Education Fund.

Steven Sims, vice president of the National Minority Supplier Development Council's government relations office, is among those taking a wait-and-see attitude following the announcement. "I think the rules provide some cover for the administration, but you have to ask how serious or committed it is," he says.

Adds Hayes, "The rules aren't going to be the panacea for all mankind. But we now have a policy that's carefully crafted and narrowly tailored. It's flexible and preserves competition. I think we did the best possible job we could." Whether that was actually good enough remains to be seen as critics of affirmative action are likely to challenge the new rules at their earliest convenience.