[Congressional Record Volume 168, Number 101 (Tuesday, June 14, 2022)]
[Extensions of Remarks]
[Pages E619-E620]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




DEPARTMENT OF JUSTICE SURVEY ON REMEDYING THE EFFECT OF DISCRIMINATION 
                         IN FEDERAL CONTRACTING

                                 ______
                                 

                        HON. CAROLYN B. MALONEY

                              of new york

                    in the house of representatives

                         Tuesday, June 14, 2022

  Mrs. CAROLYN B. MALONEY of New York. Madam Speaker, I include in the 
Record the executive summary of a report by the Department of Justice 
(DOJ) titled ``The Compelling

[[Page E620]]

Interest to Remedy the Effects of Discrimination in Federal 
Contracting: A Survey of Recent Evidence.'' The DOJ summary and 
associated report illustrate how systemic discrimination continues to 
create barriers for women- and minority-owned businesses to fairly 
compete for federal contracts and how federal contracting programs can 
respond to, address, and remedy the harmful effects of discrimination.

          [From the U.S. Department of Justice, May 16, 2022]

  The Compelling Interest To Remedy the Effects of Discrimination in 
  Federal Contracting: A Survey of Recent Evidence--Executive Summary

       On January 27, 2022, the Department of Justice posted a 
     notice in the Federal Register announcing the publication of 
     a Department of Justice report surveying the evidence 
     supporting the use of race- and sex-conscious contracting 
     programs by the federal government in order to remedy the 
     effects of discrimination.
       This report is third in a series created by the Department 
     of Justice since the Supreme Court determined that federal 
     race-conscious contracting programs must meet the strict 
     scrutiny standard of review to survive a constitutional 
     challenge based on the Equal Protection Clause in Adarand 
     Constructors, Inc. v. Pena, 515 U.S. 200, 227 (1995). Each 
     report has compiled and summarized the evidence of 
     discriminatory barriers that businesses owned by women and 
     people of color face that impede participation in government 
     contracting. Both previous reports have been cited in federal 
     court as evidence that there is a compelling governmental 
     interest in programs that support the ability of businesses 
     owned by people of color to compete on an equal basis. Strict 
     scrutiny is the most exacting standard of review, and it 
     requires, among other things, evidence supporting the 
     conclusion that such measures are necessary to further the 
     compelling governmental interest in remedying the effects of 
     past and present racial discrimination. If a program contains 
     affirmative measures based on sex, those measures are subject 
     to the somewhat lower standard of intermediate scrutiny. That 
     standard demands that any gender-based preference be 
     substantially related to an important governmental objective.
       In assessing whether race- and sex-conscious government 
     contracting programs could continue to survive heightened 
     levels of judicial review, the Department of Justice reviewed 
     hundreds of state and local disparity studies, dozens of 
     congressional hearings and related testimony, government 
     reports on public contracting, academic and expert reports on 
     public and federal contracting, academic and government 
     reports on financial data related to small businesses, and 
     recent case law related to Equal Protection challenges to 
     government contracting and grant programs. The disparity 
     studies, congressional hearings, and academic reports contain 
     both quantitative and qualitative evidence of the persistence 
     of discrimination and its lingering effects in the public and 
     private sector.
       The Department of Justice report determines that there is a 
     strong basis in evidence, both quantitative and qualitative, 
     of the continued pervasiveness of discriminatory barriers 
     that impede the full and fair participation of businesses 
     owned by women or people of color in government contracting. 
     The evidence discussed in this report supports the compelling 
     interest in the continued use of federal programs that 
     contain remedial measures to eliminate discriminatory 
     barriers to contracting opportunities for businesses owned by 
     minorities and an important state interest in the continued 
     use of federal programs that contain remedial measures to 
     eliminate discriminatory barriers to contracting 
     opportunities for businesses owned for women.
       Both the qualitative and quantitative evidence shows the 
     various ways discrimination hinders the ability of minority- 
     and women-owned businesses to compete equitably for 
     government contracts. While this discrimination can take many 
     forms, primary obstacles include: (1) discrimination limiting 
     access to capital; (2) discrimination by procurement agencies 
     and prime contractors, (3) exclusion from business networks, 
     and (4) discrimination in lending and by bonding companies 
     and suppliers.
       In assessing the current public contracting environment 
     faced by minority- and women-owned businesses, the Department 
     of Justice reviewed over 200 disparity studies from state and 
     local jurisdictions in 34 different states and the District 
     of Columbia. Disparity studies are quantitative demographic 
     analysis of public procurement contracting utilization as 
     compared to local business availability categorized by the 
     race or sex of the owner. The review of these studies shows 
     that there continues to be substantial disparities between 
     the availability of minority- and women-owned businesses and 
     the utilization of such businesses in state and local 
     government procurement in all areas of the country and at all 
     levels of procurement. The overwhelming majority of these 
     studies showed significant under-utilization of minority- and 
     women-owned businesses in almost every sector of public 
     procurement. The report cited to an overview of these 
     disparity studies conducted by the Minority Business 
     Development Agency in 2016, which found that the studies 
     indicated significant contracting disparities for minority 
     business enterprises that were pervasive across different 
     ethnic and racial groups, industries, and geographies. 
     Shockingly, the median value for the observed disparities was 
     just 19%, indicating that minority businesses were being 
     utilized at less than one-fifth of their availability in a 
     given marketplace.
       The report also reviewed federal government small business 
     contracting. In 2017, just 9.8% of federal spending on 
     contracts went to minority-owned businesses. The same year, 
     woman-owned businesses received only 5% of federal prime 
     contract awards. Even when comparing businesses and 
     controlling for the industry in which the firm did business, 
     business age, business size (both in terms of average number 
     of employees and annual receipts), business form, and 
     security clearance, the likelihood of minority-owned 
     businesses receiving a federal contract versus similar 
     businesses is still lower than non-minority-owned businesses.
       Overwhelmingly, the disparity studies and reports also 
     present evidence linking disparities in contracting to 
     discriminatory factors. In the private financial sector, 
     historic barriers and private discrimination has limited the 
     ability of minority business owners to accumulate assets and 
     wealth. Minority-owned businesses are two to three times more 
     likely to be denied credit, more likely to avoid applying for 
     loans based on the belief they will be turned down, and more 
     likely to receive smaller loans and pay higher interest rates 
     on the loans they do receive. Minority- and women-owned firms 
     not only receive smaller loans at higher interest rates than 
     firms owned by White males, but they also get smaller equity 
     investments.
       In the bonding arena, both quantitative and qualitative 
     evidence shows that bonding requirements disproportionately 
     affect businesses owned by women or people of color. 83% of 
     minority- and women-owned businesses identified bonding 
     requirements as a specific barrier to the ability to obtain 
     contracts. A number of recent studies show that minority-
     owned firms are significantly more likely to face 
     difficulties in obtaining required bonds compared with 
     majority-owned firms.
       The evidence presented in the report indicates that the 
     barriers that have impeded the growth and success of 
     minority- and women-owned businesses continue to exist and 
     that government contracting preference programs ameliorate 
     the effects of public and private discrimination. For 
     example, a 2017 disparity study prepared for the Los Angeles 
     County Metropolitan Transportation Authority compared the 
     participation of minority- and women-owned businesses on 
     contracts that contained goals to encourage utilization of 
     minority- and women-owned businesses as opposed to contracts 
     that did not contain such goals. The results showed that on 
     contracts without goals, minority- and women-owned firms 
     earned only 53 cents on the dollar, but on contracts with 
     goals, such firms earned 96 cents on the dollar--almost what 
     would be expected given the availability of such firms in the 
     marketplace.
       The federal government currently operates two main 
     contracting programs with race and/or sex-conscious elements: 
     the SBA Section 8(a) business development program and the 
     Department of Transportation Disadvantaged Business 
     Enterprise program. All federal departments and major 
     independent agencies participate in the SSA's Section 8(a) 
     business development program, which offers a variety of 
     assistance, including set-aside federal government contracts 
     to socially and economically disadvantaged businesses. In 
     Fiscal Year 2019, the federal government awarded $30.4 
     billion to 8(a) firms.
       Appendices of 219 state and local disparity studies, 45 
     relevant academic and government studies, and 28 
     Congressional hearings are included with the report. The 
     Federal Register notice announcing the report may be found at 
     87 FR 4955, and the report itself is publicly available at 
     the Department of Justice.

                          ____________________