Goals and Set Asides

What is the difference and are they still needed?

More than a decade ago, Californians passed Proposition 209 to abolish all affirmative action.  The political proponents proclaimed the evils of quotas and argued that women and minorities were getting special treatment in the state for everything from college admissions to construction contracts.  What the proponents of Prop 209 failed to grasp was the difference between quotas and goals.

A goal is something to strive for; a quota or set aside is where a certain amount of a contract (or school admission spaces) is reserved for a specific class of people.  Quotas are only legal when there has been a showing of past discrimination and creating a set aside or quota is a specifically tailored remedy for that past discrimination.(The legal standard of narrowly tailored remedy versus reasonable relationship is different depending if the discrimination involved race or gender discrimination)

I explain goals and affirmative action to my high school aged daughter as follows:  Affirmative action is like recruiting for a new co-ed basketball team at school.  Let's say the local park and recreation department wants to start a co-ed basketball team.  The Recreation Supervisor happens to be male. He pulls out his phone/e-mail list and calls all of his friends who coach sports asking them to post flyers and notices about the new team.  The people called also happen to all be men who are coaches at the local high schools' athletic departments.  The Recreation Supervisor is not discriminating, he is just calling the people he knows and usually deals with.  The affirmative action comes when this recreation supervisor makes the extra effort to contact all of the coaches of the women's athletics departments at all the high schools and asks them to also post the notices about the new team. Now, my daughter still has to run, dribble, jump and shoot well enough to meet the standard set for the team. She does not automatically get on the team because she is female. Instead, she must show she is qualified. But, she would never have had the opportunity to compete and make the team, unless the Recreation Supervisor made the extra effort, the affirmative action, to make sure she knew about the opportunity. And, while the Recreation Supervisor might have a goal for the number of boys and girls to be on the team, it is not a hard and fast set number based only on gender. All kids who make the team must be able to meet the standard set in the tryouts.

In some instances the federal government, either under Congressional mandate or court order, requires set asides.  These set aside programs are usually restricted to a small number of contracts or dollar limitations. Almost every state program operates under a goals program.  And, when the agency oversteps that authority and turns a goal into a set aside, the state or agency is routinely sued.

However, goals programs have been around for as many years and can be even more successful than set aside programs. The most successful goals program is one established by the U.S. Department of Transportation.  In the late 1970s, Congress recognized and set a contracting goal for minority-owned businesses contracting on DOT funded projects at 10%. In 1983, Elizabeth Dole - then Secretary of Transportation - set a 3% goal for women-owned businesses (WBE- women business enterprise).  In 1987, Congress combined this program to establish a floor (not less than) 10% procurement/contracting goal for DVBE (disadvantaged business enterprises, which was defined as including both women- and minority-owned businesses).  In 1990, a separate 5% contracting goal was set for all agencies for women-owned businesses.

The DOT goals program required that the DOT and its funding recipients use their best efforts to include women- and minority-owned businesses in the solicitation, bidding and performance of federal contracts.  The DOT has one of the most successful outreach programs of any federal agency with over 10% participation of DVBEs and also exceeds the individual 5% procurement goal for women-owned businesses.  This is not a set aside program but instead an agency which recognizes that increased competition will bring  more competitive pricing to the contracting process without compromising the quality of work. 

Agencies frequently require general contractors or prime bidders to document that they have contacted and solicited a bid or price from a women- or minority-owned company as part of the bidding process. Now, women- and minority-owned contractors still have to be qualified and capable of performing the work in order to be awarded or participate in the contract. However, the additional outreach is what opens the door to women- and minority-owned businesses. Most businesses do not want to be handed a contract only because they fit into a specific box due to their race or gender. What they DO want is equal access to contract opportunities and bidding.

Why are goals better than set asides?
A set aside program only allocates an extremely small part of the procurement dollar to this small elite group of bidders. Why should women and minorities be relegated to less than 1/4 of 1% of all procurement? Rather, they should have an opportunity to fairly compete for 100% of the procurement dollars.

As set aside programs are usually for fairly small contracts, it does not provide sufficient depth to grow a company. Implementing a goals program creates greater competition and more competitive pricing.

Goals create a level playing field for all qualified contractors to compete while still requiring those who are targeted by the goals program to be qualified, competent and submit a competitive bid.

So are goals still needed?
When women and minorities make up a substantial number of small business owners, yet their participation in the state and federal contracting arena are drastically less, goals are still a good way to open the market and increase competition.

The US Department of Transportation is requiring California (Caltrans) to reinstate race-based goals. A requirement of providing fair opportunity for contracting to all is of important state and national interest. Prop 209 was faulty in that it sought to do away with goals as well as quotas (set-asides). Quotas restrict trade and competition and goals/affirmative action creates greater competition and opportunity.

Deborah Wilder is the president of Women Construction Owners and Executives, USA (www.wcoeusa.org), an attorney licensed in California and Oregon, and the owner of a construction consulting company.