[Congressional Record (Bound Edition), Volume 151 (2005), Part 22]
[Senate]
[Pages 30658-30659]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          DEFENSE CONTRACTING

  Mr. KENNEDY. Mr. President, I commend the House and Senate conferees 
for their agreement to extend the Defense Department program to prevent 
defense contracting firms supporting or subsidizing the kind of 
discrimination that has long been a problem in such contracting. The 
extension through September 2009 is clearly needed to achieve that 
important goal.
  Defense contracting has long been dominated by old-boy networks that 
make it very difficult for African-Americans, Latinos, Asians, and 
Native Americans to participate fairly in these opportunities, or even 
obtain information about them. Minorities historically have been 
excluded from both public and private construction contracts in 
general, and from Federal defense contracts in particular. Since its 
adoption, the Defense Department's effort, called the 1207 program, has 
helped level the playing field for minority contractors. Extending the 
program was a priority, since it's clear there is much more to do.
  Since the program was first enacted in 1986, racial and ethnic 
discrimination has continued to be a substantial obstacle to minority 
participation in Federal contracts. In some cases, overt discrimination 
prevents minority- owned businesses from obtaining needed loans and 
bonds. Prime contractors, unions, and suppliers of goods and materials 
have consistently preferred to do business with white contractors 
rather than minority firms.
  Minorities have been consistently underutilized in government 
contracting. In 1996, the Urban Institute released a report documenting 
minority firms received only 57 cents in government contracts for every 
dollar they should have received based upon their eligibility.
  For specific racial groups and women, the disparities were even 
greater. African-American owned firms received only 49 cents on the 
dollar; Latino-owned firms, 44 cents; Asian-American owned firms, 39 
cents; Native American-owned firms, 18 cents.
  These statistics are particularly troubling, because they exist 
despite affirmative action programs in many jurisdictions. Without such 
programs, the problem would be worse. The Urban Institute report found 
that disparities for minority- and women-owned firms were greatest in 
the areas where no affirmative action program was in place. For African 
Americans, the percentage dropped from 49 percent to 22 percent, for 
Latinos from 44 percent to 26 percent, for Asians from 39 percent to 13 
percent, and for Native Americans from 18 percent to 4 percent. These 
figures show that affirmative action is not only effective, but still 
urgently needed.
  We've also seen repeated reports of bid shopping and of minority 
businesses being denied contracts despite submitting the lowest bid.
  Also, the Department's decision to award a growing number of defense 
contracts noncompetitively has excluded minority-owned businesses from 
a significant number of contracting opportunities. No-bid contracts 
also hurt white-owned businesses, but they disadvantage minority-owned 
firms in particular.
  These problems affect a wide variety of areas in which the Department 
offers contracts, and the problems are detailed in recent studies.
  A 2002 Dallas study found that minority business enterprises were 
significantly disadvantaged in obtaining contract work. Evidence in 
that report also suggests that discrimination takes place in subtle 
ways, such as by making unrealistic demands on minority contractors, or 
refusing to pay them on time. A Hispanic-American contractor noted that 
on several occasions, he and other minority contractors were not 
informed of bid opportunities with government agencies, even though 
they performed services in the field. A Native American contractor in 
goods and other services noted that some customers visit his company 
and walk out, once they see the owner is not a white man. Many minority 
firms reported being consistently underestimated by white prime 
contractors who assume they are not capable of doing the work because 
they are minority-owned. Minority firms expressed concern that they 
will never become large enough to compete for larger contracts if they 
are denied a chance to prove themselves on smaller contracts.
  In Cincinnati, a 2002 study found that ``bid shopping'' by prime 
contractors continues to harm minority firms. The firms also reported 
numerous obstacles in seeking work in the city, such as denial of 
opportunities to bid, lack of response to minority presentations for 
bidding, limited financing, problems obtaining bonds, slow pay, 
predatory business practices, and stereotypical attitudes that 
minorities are incapable of performing good work.
  A 2003 study of contracting in Ohio found racial prejudice in both 
the public and private sectors. A State inspector was alleged to have 
expressed hatred for African Americans in ugly terms. An African-
American professional service contractor said that his prime contractor 
deliberately sabotaged his work by breaking his equipment. A state 
inspector conceded to an African-American contractor that he was 
requiring him to do more expensive work than he would have required of 
a large white-owned contractor doing an identical job nearby. Banks and 
unions sometimes contribute to the obstacles by discriminating against 
minorities in awarding financing.
  A 2004 study in Alameda, CA, also found significant underutilization 
of minority-owned firms.
  I have received a letter from an African-American business owner, Mr. 
John McDonald, explaining the difficulties minority firms face in the 
contracting business and I ask unanimous consent to have it printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                December 18, 2005.
     Senator Edward M. Kennedy,
     Senate Armed Services Committee,
     U.S. Senate, Washington DC.
       Dear Senator Kennedy: My name is John McDonald and I am an 
     African-American business owner. I understand that the Senate 
     will soon consider the reauthorization of the Department of 
     Defense's 1207 program. I want to urge you to make sure that 
     program continues. As my own experience over the last few 
     years makes clear, discrimination is still a serious and 
     pervasive problem for business owners in America. The 
     unfortunate reality today is that the playing field is still 
     not level for businessmen like me.
       I work in the fields of institutional real estate 
     acquisition, development and construction. I am very good at 
     what I do and very proud of the quality of my work. Like most 
     businesspeople. I want to grow my company and succeed. This 
     desire comes both from pride in my business and from my 
     desire to give my family, that includes my five beautiful 
     children the best opportunity to succeed in life. I know that 
     the Department of Defense has spent millions of dollars on 
     contracts for the type of work that I do and while I have not 
     worked for DOD in the past, I would welcome the chance to do 
     so.
       The problem for me, and many businesspeople like me, is 
     that discrimination often stands in our way. I would like to 
     share with you just one example of the seriousness of 
     discrimination against minority business people. A few years 
     ago, I entered into four triple net leases with Domino's 
     Pizza to purchase land and build four prototype corporate 
     leased stores in Las Vegas, Nevada. I purchased the sites 
     they selected, and spent hundreds of thousands of dollars 
     towards completing these stores based on a 30 year, triple 
     net lease. The money was from loans and personal funds 
     invested in my company it also included bank financing which 
     I personally guaranteed. The restaurants were beautiful, top 
     of the line establishments and Domino's even featured my work 
     at their convection in Las Vegas that year. I admit that I 
     was startled to find that I was the only African-American in 
     attendance at the convention, but I was so proud of my work 
     that I didn't think much of it at the time. That was soon to 
     change.
       Soon after the convention, a senior Domino's official, 
     Debbie Pear called me and told me we had to amend our leases 
     in a way that no businessman in my position could do. She 
     wanted me to give Domino's the right to opt out of the lease 
     with a simple 30 day notice, reneging on the initial 30 year 
     obligation. In my field this is unheard of. When I refused to 
     do this, she made clear she

[[Page 30659]]

     wasn't very concerned at my objections and she said frankly 
     ``I don't like doing business with you people. anyway''. It 
     was her position that I would make the change as I couldn't 
     afford not to. Domino's had more money and could tie the 
     matter up in court and I would either be forced to make the 
     change, or loose my business, either way they would prevail. 
     Sadly, that is exactly what they did.
       Domino's stopped paying rent to me on the very profitable 
     stores that were built by my company. They stifled 
     construction on stores by removing my name as landowner with 
     local county municipalities. They blocked financing as well 
     as the sale of these properties, making my company income 
     void. Within months, I had to file for bankruptcy. Domino's 
     slandered my name in an organized effort to have a Trustee 
     appointed to the case. who intentionally settled the company 
     claim with Domino's for a mere $45,000. As you could imagine 
     these tactics hit my business hard, and caused emotional and 
     financial trauma for me and my family. The fact is, big 
     corporate conglomerates such as Domino's Pizza, make fairness 
     in business impossible. As Americans, where free enterprise 
     is suppose to prevail, we cannot allow these businesses to 
     put small business out of business.
       I am not a man who stands still in the face of injustice. I 
     have filed a lawsuit and my chum has been litigated all the 
     way to the U.S. Supreme Court which beard oral argument in my 
     case on December 6, 2005. The problem is that I do not want 
     to be in court while I am willing to stand up and fight for 
     my rights, I would rather spend my time building a business, 
     doing high quality work and providing for my family. 
     Unfortunately in my case, ongoing discrimination has made 
     that impossible.
       Hopefully my story has made it clear how important these 
     types of programs are. There is such pervasive discrimination 
     in the private markets that we must have assistance from 
     programs like the 1207 program. Help us help all minority and 
     small business survive and fulfill the American dream. Please 
     ensure that this important program is continued.
           Sincerely,
                                                    John McDonald.

  Mr. KENNEDY. One of the purposes of this program is to ensure that 
government contracting does not subsidize--even indirectly--private 
discrimination. Because discrimination affects contracting by private 
firms as well as State and local governments, and all contractors bid 
in for these contracts as well as for Federal defense contracts, it is 
important to ensure a level playing field in Federal contracting.
  Finally, the data in the Department of Commerce benchmark study 
supports the need to improve contracting opportunities for minority-
owned businesses.
  The 1207 program helps to correct these pervasive problems of 
discrimination without imposing an undue burden on white-owned 
businesses. Small businesses owned by white contractors are eligible to 
receive the benefits of the program if they are socially or 
economically disadvantaged.
  All of us benefit when recipients of Federal opportunities reflect 
America's diversity, and I'm proud to support the reauthorization of 
the 1207 program.

                          ____________________