Ready, aim, fire: critics continue to blast away at federal set-aside programs

Black Enterprise, March, 1996 by Thomas D. Boston

One of the top priorities of the current congressional majority is to dismantle affirmative action. So the recently released General Accounting Office report, focusing on alleged mismanagement and abuse in the Small Business Administration's 8(a) Program, comes as no surprise. The report simply provides more ammunition to opponents in Congress who have already sponsored bill after bill in a well orchestrated attempt to abolish federal minority business set-aside programs.

The major findings of the report, as summarized by a Wall Street journal writer, are that some successful minority-owned companies have doctored their books to remain eligible for federal set-asides, that awards have been made to favored companies without competitive bidding, and that a relatively small group of well-wired companies have received the lion's share of 8(a) contracts. Currently, the politically correct slogans for opponents of affirmative action are quotas, favoritism and abuse.

Certainly, taxpaying citizens have a right to expect federal procurement to be free of mismanagement and abuse. But the government normally deals with abuse by establishing stringent guidelines, monitoring compliance, and penalizing abusers. This is how it dealt with the nation's largest defense contractors who defrauded the DOD. This is also how it recently dealt with the country's most prestigious universities that were caught engaging in illegal billing practices.

But when it comes to set-asides, it seems that every abuse is another excuse to abolish the programs.

The pioneering study of minority-owned businesses conducted by the U.S. Commission on Civil Rights in 1975 found that minority and women-owned firms faced problems of staggering proportions in pursuing federal, state and local contracts. The 8(a) Program is designed to redress this disparity. Through this provision, the SBA procures contracts directly from the federal departments nd agencies and lets them to minority and women-owned businesses under more favorable conditions. This form of market intervention has proven to be the only effective way of overcoming the current effects of decades of racial exclusion from federal contracting. Yet the June 1995 decision of the U.S. Supreme Court in the case of Adarand v. Pena alone has succeeded at gradually dismantling federal set-asides.

Last October, the DOD canceled its rule-of-two minority set-aside provision in response to this decision. The Court ruled that all federal affirmative action programs that use racial classifications will be subject to strict scrutiny. The action prevents Congress from using its broad authority to authorize federal departments to implement race-based affirmative action programs. To do so now, agencies must undertake elaborate studies to document racial discrimination.

The DOD estimates this change will decrease awards to minorities by about $1 billion. More disturbing, however, is that all other aspects of DOD's affirmative action policies to assist minority firms are under review. Conceivably, all could suffer the same fate as the rule-of-two program. In fiscal year 1994, DOD awarded $8.4 billion to minority businesses through various set-aside provisions.

At the present time, there are 26 federal agencies and departments with minority business affirmative action programs. These programs spent $14.3 billion on minority procurement in 1994 and an additional $5 billion in grants, contracts and loans with minority businesses and institutions such as historically black colleges and universities. Every program is now under review and subject to cancellation.

The death of set-asides at the federal, state and local levels would be devastating for many black businesses. Minority entrepreneurs still do not enjoy equal access to commercial opportunities in the private sector, so government procurement is crucial in affording them the opportunity to diversify into nontraditional markets that formerly excluded them. -Thomas D. Boston, a professor