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97-1304 -- Adarand Constructors Inc. v. Slater -- 09/25/2000
| Keyword | Case | Docket | Date: Filed / Added | (222783 bytes) (217981 bytes)
PACIFIC LEGAL FOUNDATION; ASSOCIATED GENERAL CONTRACTORS OF AMERICA, INC.; EMPLOYMENT LAW CENTER; MINORITY BUSINESS ENTERPRISE LEGAL DEFENSE AND EDUCATION FUND, INC.,
Following the Supreme Court's vacation of our dismissal on mootness grounds, we address the merits of this appeal, namely, the federal government's challenge to the district court's grant of summary judgment to plaintiff-appellee Adarand Constructors, Inc. In so doing, we must resolve the constitutionality of the use in federal subcontracting procurement of the Subcontractor Compensation Clause ("SCC"), which employs race-conscious presumptions designed to favor minority enterprises and other "disadvantaged business enterprises" ("DBEs"). Our evaluation of the SCC program utilizes the "strict scrutiny" standard of constitutional review enunciated by the Supreme Court in an earlier decision in this case, Adarand Constructors, Inc. v. Peña, 515 U.S. 200 (1995) ("Adarand III").
The Supreme Court has characterized the facts of this case as "fairly straightforward," Adarand III, 515 U.S. at 206, summarizing the relevant facts as follows:
In Adarand Constructors, Inc. v. Peña, 16 F.3d 1537, 1539 (10th Cir. 1994) ("Adarand II"), this Court affirmed the district court's judgment on different grounds. We concluded that Adarand had standing to challenge the SCC program as it pertains to minority business enterprises but not women-owned business enterprises and addressed our inquiry to the SCC as a program implemented pursuant to § 502 of the Small Business Act of 1958 ("SBA"), Pub. L. No. 85-536, 72 Stat. 384 (codified as amended, 15 U.S.C. § 631 et seq.). See Adarand II, 16 F.3d at 1543 (citing 15 U.S.C. § 644(g)). Like the district court, we relied on Metro Broadcasting, 497 U.S. at 565, applying intermediate scrutiny to the SCC and holding "the SCC program . . . constitutional because it is narrowly tailored to achieve its significant governmental purpose of providing subcontracting opportunities for small [DBEs], as required under section 502 of the [SBA]." Adarand II, 16 F.3d at 1547.
The Supreme Court reversed. It overruled Metro Broadcasting and cast doubt on Fullilove insofar as that case might be read to apply less than strict scrutiny to federal programs involving racial classifications. See Adarand III, 515 U.S. at 227, 235.(1)
On remand, the district court held the SCC program unconstitutional, finding it insufficiently narrowly tailored to further a compelling interest because the program was both over- and under-inclusive, including minority individuals who were not in fact disadvantaged and excluding non-minority individuals who were disadvantaged. See Adarand Constructors, Inc. v. Peña, 965 F. Supp. 1556 (D. Colo. 1997) ("Adarand IV"). With regard to the Court's pronouncement in Adarand III that strict scrutiny is not "fatal in fact," the district court found it "difficult to envisage a race-based classification" that would ever be narrowly tailored, thereby effectively pronouncing strict scrutiny fatal in fact. Id. at 1580. The district court granted summary judgment to Adarand.
With regard to the foregoing statutes, regulations, and SCC, the parties disagree as to whether we may properly consider intervening changes in the law between 1992 when Adarand I was handed down and the present.(2) Our resolution of that dispute is ultimately compelled by the logic of the well-settled precedent of both the Supreme Court and this Circuit. Adarand seeks only prospective declaratory and injunctive relief. See Adarand III, 515 U.S. at 210.(3) Application of the intervening statutory and regulatory changes to this type of claim does not implicate any presumption against the retroactive application of statutes. See Landgraf v. USI Film Prods., 511 U.S. 244, 273 (1994) ("Even absent specific legislative authorization, application of new statutes passed after the events in suit is unquestionably proper in many situations. When the intervening statute . . . affects the propriety of prospective relief, application of the new provision is not retroactive."); Jurado-Gutierrez v. Greene, 190 F.3d 1135, 1149 (10th Cir. 1999) (applying Landgraf), cert. denied sub nom. Palaganas-Suarez v. Greene, 120 S. Ct. 1539 (2000); see also Jones v. Hess, 681 F.2d 688, 695 n.9 (10th Cir. 1982) ("Generally an appellate court must apply the law in effect at the time it renders its decision where a change in law occurs while a case is on direct appeal, although there may well be an exception to this rule to prevent manifest injustice." (citations omitted)); McMahan v. Hunter, 179 F.2d 661, 663 (10th Cir. 1950) ("[W]here a rule of law was changed after the decision in the trial court but before the decision in the Appellate Court, the decision in the Appellate Court must be according to the new law."); 13A Charles Alan Wright et al., Federal Practice & Procedure, Jurisdiction 2d § 3533.6 (1984) ("Ordinarily, courts . . . apply[] the law in force at the time of decision, unless a good reason appears for ignoring the change."); cf. Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 836-37 (1990). To ignore intervening changes in the statutory and regulatory framework underlying this litigation would be to shirk our responsibility to strictly scrutinize the real-world legal regime against which Adarand seeks prospective relief. The changes in the law are squarely before us today, and we discern no reason to leave their scrutiny to future litigation, in effect prolonging the instant litigation and fostering "both a wasteful expenditure of resources by courts and litigating parties and the gradual undermining of public confidence in the judiciary--in short, Dickens's Jarndyce v. Jarndyce syndrome." McIlravy v. Kerr-McGee Coal Corp., 204 F.3d 1031, 1035 (10th Cir. 2000).
However, considering that we are reviewing a decision of the district court below that relied on older versions of the statutes, regulations, and SCC, and because we are mindful that future statutory and regulatory changes may cause the government to "engage in (or resume) [the] harmful conduct" in question earlier in this litigation so as to militate against a finding of mootness, Adarand VI, 120 S. Ct. at 726 (quoting Friends of the Earth, 120 S. Ct. at 699), we consider the statutory and regulatory framework in its prior stages as well.(4) See also Northeastern Fla. Chapter of Associated Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 662 (1993) ("[A] defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice." (quoting City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289 (1982))). It is not fanciful to suggest that the government may retreat to prior practice, but if the government did so, this opinion expressly holds that such an action would be unconstitutional for the reasons discussed below.
In furtherance of the policy stated in § 8(d)(1), the Act establishes "[t]he Government-wide goal for participation by small business concerns owned and controlled by socially and economically disadvantaged individuals" at "not less than 5 percent of the total value of all prime contract and subcontract awards for each fiscal year." 15 U.S.C. § 644(g)(1). It also requires the head of each federal agency to set agency-specific goals for participation by businesses controlled by socially and economically disadvantaged individuals. Id.Adarand III, 515 U.S. at 206. These goals must "realistically reflect the potential" of small disadvantaged businesses to perform subcontracts. See 15 U.S.C. § 644(g)(2), (h)(1). Under both § 8(a) and § 8(d), subcontractors can be certified as DBEs, qualifying them for the SCC program at issue in this litigation.
STURAA, ISTEA, and TEA-21, the transportation appropriations statutes at issue in this case, incorporate the presumption of disadvantage from SBA § 8(d). See STURAA § 106(c)(2)(B), ISTEA § 1003(b)(2)(B); TEA-21 § 1101(b)(2)(B) (providing that the term "socially and economically disadvantaged individuals" has the meaning of such term under SBA § 8(d) "and relevant subcontracting regulations promulgated pursuant thereto."). STURAA, ISTEA, and TEA-21 all set forth aspirational goals of 10% DBE participation in federal subcontracting. See STURAA § 106(c)(1); ISTEA § 1003(b)(1); TEA-21 § 1101(b)(1).(5)
McGarry v. Board of County Comm'rs, 175 F.3d 1193, 1198 (10th Cir. 1999). At the very outset, before immersing ourselves in the intricacies of the issues before us, we emphasize our substantial agreement with much of the district court's judgment as it pertains to the versions of the statutes and regulations in place in 1996. Insofar as the court's judgment does not exceed the proper scope of its review and with the significant caveat that we disagree both with the court's conclusion regarding the fatality in fact of strict scrutiny and with its ultimate result in light of the current version of the relevant regulations, we take the district court's view of the matter. And we share wholeheartedly its sentiment that the time has come for this litigation to come to an end. See Adarand IV, 965 F. Supp. at 1558.A. Evolution of Strict Scrutiny Standards
Adarand III, 515 U.S. at 235, cast doubt on Fullilove. "[T]o the extent (if any) that Fullilove held federal racial classifications to be subject to a less rigorous standard, it is no longer controlling. But we need not decide today whether the program upheld in Fullilove would survive strict scrutiny as our more recent cases have defined it." Id. We interpret that statement in Adarand III as precluding reliance on Fullilove for either the standard of review or the result in this case. Otherwise, the programs at issue here would almost certainly pass muster under the Fullilove standard because, in furtherance of substantially similar goals, the programs before us impose a significantly more flexible and less intrusive remedy--a voluntary subsidy as opposed to a fixed set-aside subject to waiver.(6)
In 1989 the Court produced a majority for a portion of an affirmative action opinion. See Croson, 488 U.S. at 469. In Croson, the Court struck down under strict scrutiny a municipal plan requiring "prime contractors to whom the city awarded construction contracts to subcontract at least 30% of the dollar amount of the contract to one or more [MBEs]." Id. at 477. In so doing, Justice O'Connor, joined by Chief Justice Rehnquist and Justice White, rejected the competing arguments that a state's power to remedy racial discrimination is equal to that of Congress under § 5 of the Fourteenth Amendment and that the Fourteenth Amendment effectively preempts state action in matters of race. See id. at 489-93 (Op. of O'Connor, J.).(7) A plurality of the Court then proceeded to reject the proposition that the level of scrutiny varies in cases of "benign" and invidious racial classifications, noting that black Americans constituted a controlling political majority in the city of Richmond, a fact militating against the application of a more deferential standard of review. Id. at 495-96 (Op. of O'Connor, J.).
What did produce a clear majority in Croson was the proposition that "the factual predicate offered in support of the Richmond Plan suffers from the two defects identified as fatal in Wygant [v. Jackson Board of Education, 476 U.S. 267 (1986)]," Croson, 488 U.S. at 498, namely, failure to make findings specific to the market to be addressed by the remedy and to provide limits to the scope of that remedy due to only generalized findings of discrimination.(8) The Court stated that "[w]hile there is no doubt that the sorry history of both private and public discrimination in this country has contributed to a lack of opportunities for black entrepreneurs, this observation, standing alone, cannot justify a rigid racial quota in the awarding of public contracts in Richmond, Virginia." Id. at 499. In particular, the majority noted it was "sheer speculation" to simply guess how many firms there would be absent past discrimination and "[t]he 30% quota cannot in any realistic sense be tied to any injury suffered by anyone." Id.
In its brief, Adarand cites general language from Adarand III in an attempt to limit the permissible scope of Congress's power to redress the effects of racial discrimination, ignoring the substantial differences between the scope of problems to be addressed by Congress and those to be addressed by a city council such as that in Croson. The fact that Congress's enactments must serve a compelling interest does not necessitate the conclusion that the scope of that interest must be as geographically limited as that of a local government. See Croson, 488 U.S. at 489 (Op. of O'Connor, J.).(9) Although there is not a clear majority on the Court for the proposition that § 5 of the Fourteenth Amendment grants Congress broad remedial powers in the area of discrimination, in Section II of Justice O'Connor's opinion in Croson, Justice O'Connor and Chief Justice Rehnquist endorsed that proposition. See Croson, 488 U.S. at 490 ("That Congress may identify and redress the effects of society-wide discrimination does not mean that, a fortiori, the States and their political subdivisions are free to decide that such remedies are appropriate."). The geographic scope of Congress's reach in this regard is "society-wide" and therefore nationwide. See id.(10)
In addressing the question of what evidence of discrimination supports a compelling interest in providing a remedy, we consider both direct and circumstantial evidence, including post-enactment evidence introduced by defendants as well as the evidence in the legislative history itself. See Concrete Works, 36 F.3d at 1521, 1529 n.23 (considering post-enactment evidence).(11) Furthermore, we may consider public and private discrimination not only in the specific area of government procurement contracts but also in the construction industry generally; thus, any findings Congress has made as to the entire construction industry are relevant. See id. at 1523, 1529; see also Croson, 488 U.S. at 492 (Op. of O'Connor, J.).
In Concrete Works, we noted that
Neither Croson nor its progeny clearly state whether private discrimination that is in no way funded with public tax dollars can, by itself, provide the requisite strong basis in evidence necessary to justify a municipality's affirmative action program. A plurality in Croson simply suggested that remedial measures could be justified upon a municipality's showing that "it had essentially become a 'passive participant' in a system of racial exclusion practiced by elements of the local construction industry." Croson, 488 U.S. at 492. Although we do not read Croson as requiring the municipality to identify an exact linkage between its award of public contracts and private discrimination, such evidence would at least enhance the municipality's factual predicate for a race- and gender-conscious program.
Concrete Works, 36 F.3d at 1529. Unlike Concrete Works, the evidence presented by the government in the present case demonstrates the existence of two kinds of discriminatory barriers to minority subcontracting enterprises, both of which show a strong link between racial disparities in the federal government's disbursements of public funds for construction contracts and the channeling of those funds due to private discrimination. The first discriminatory barriers are to the formation of qualified minority subcontracting enterprises due to private discrimination, precluding from the outset competition for public construction contracts by minority enterprises. The second discriminatory barriers are to fair competition between minority and non-minority subcontracting enterprises, again due to private discrimination, precluding existing minority firms from effectively competing for public construction contracts. The government also presents further evidence in the form of local disparity studies of minority subcontracting and studies of local subcontracting markets after the removal of affirmative action programs. Discussion of each of those bodies of evidence follows.(12)
Id. at 26,058 (footnotes omitted) (citing The Colorado Center for Community Development, University of Colorado at Denver, Survey of Small Business Lending in Denver v (1996)). Such findings strongly support an initial showing of discrimination in lending; and we take judicial notice of the obvious causal connection between access to capital and ability to implement public works construction projects.(13)
The disparity between minority DBE availability and market utilization in the subcontracting industry raises an inference that the various discriminatory factors the government cites have created that disparity. In Concrete Works, we stated that "[w]e agree with the other circuits which have interpreted Croson impliedly to permit a municipality to rely . . . on general data reflecting the number of MBEs and WBEs in the marketplace to defeat the challenger's summary judgment motion," and we do not see Adarand III as requiring any different standard in the case of an analogous suit against the federal government. 36 F.3d at 1528.(14) Although the government's aggregate figure of a 13% disparity between minority enterprise availability and utilization is not overwhelming evidence, it is significant. It is made more significant yet by the evidence showing that discriminatory factors discourage both enterprise formation of minority businesses and utilization of existing minority enterprises in public contracting. Of course, it would be "sheer speculation" to even attempt to attach a particular figure to the hypothetical number of minority enterprises that would exist without discriminatory barriers to minority DBE formation. Croson, 488 U.S. at 499. However, the existence of evidence indicating that the number of minority DBEs would be significantly (but unquantifiably) higher but for such barriers is nevertheless relevant to the assessment of whether a disparity is sufficiently significant to give rise to an inference of discriminatory exclusion.(15)
Adarand and the amici curiae supporting it have utterly failed to meet their "ultimate burden" of introducing credible, particularized evidence to rebut the government's initial showing of the existence of a compelling interest in remedying the nationwide effects of past and present discrimination in the federal construction procurement subcontracting market.(16) Concrete Works, 36 F.3d at 1522 (quoting Wygant, 476 U.S. at 277). Its assertions as to the general impermissibility of a race-conscious remedy regardless of the compelling interest identified by Congress are not in accordance with equal protection jurisprudence. It is simply an untenable interpretation of Equal Protection Doctrine to insist that the Constitution requires Congress to acquiesce in the workings of an ostensibly free market that would direct the profits to be gleaned from disbursements of public funds to non-minorities alone. See Concrete Works, 36 F.3d at 1519 ("[T]he Fourteenth Amendment permits race-conscious programs that seek . . . to prevent the public entity from acting as a '"passive participant" in a system of racial exclusion . . .' by allowing tax dollars 'to finance the evil of private prejudice.'" (quoting Croson, 488 U.S. at 492)); see also Adarand III, 515 U.S. at 237 ("The unhappy persistence of both the practice and the lingering effects of racial discrimination against minority groups in this country is an unfortunate reality, and government is not disqualified from acting in response to it.").
We reject Adarand's characterization of various congressional reports and findings as conclusory and its highly general criticism of the methodology of numerous "disparity studies" cited by the government and its amici curiae as supplemental evidence of discrimination.(17) The evidence cited by the government and its amici curiae and examined in this opinion only reinforces the conclusion that "racial discrimination and its effects continue to impair the ability of minority-owned businesses to compete in the nation's contracting markets." The Compelling Interest, 62 Fed. Reg. at 26,062. In Concrete Works, 36 F.3d at 1530-31, the plaintiff "specifically identified" and "put forth evidence" showing "flaws" in the data justifying the City of Denver's affirmative action program, thus precluding summary judgment on the issue of compelling interest. Here, by contrast, the government's evidence permits a finding that as a matter of law Congress has the requisite strong basis in evidence to take action to remedy racial discrimination and its lingering effects in the construction industry. This evidence demonstrates that both the race-based barriers to entry and the ongoing race-based impediments to success faced by minority subcontracting enterprises--both discussed above--are caused either by continuing discrimination or the lingering effects of past discrimination on the relevant market. Furthermore, Congress is not limited to simply proscribing federal discrimination against minority contractors, as it has obviously already done. The Constitution does not obligate Congress to stand by idly and continue to pour money into an industry so shaped by the effects of discrimination that the profits to be derived from congressional appropriations accrue exclusively to the beneficiaries, however personally innocent, of the effects of racial prejudice.(18)
Paradise, 480 U.S. at 171 (1986) (plurality op. of Brennan, J.) (citations omitted). Regarding flexibility, "the availability of waiver" is of particular importance. Id. As for numerical proportionality, Croson admonishes us to beware of the "completely unrealistic assumption that minorities will choose a particular trade in lockstep proportion to their representation in the local population." 488 U.S. at 507 (quoting Sheet Metal Workers, 478 U.S. at 494 (O'Connor, J., concurring in part and dissenting in part)). In that context, a "rigid numerical quota" particularly disserves the cause of narrow tailoring. Id. at 508.(19) Finally, as for burdens imposed on third parties, a plurality of the Court in Wygant stated:
The first factor to be considered is that of the availability of alternative remedies to the race-conscious measures at issue. The district court in Adarand IV found, and Adarand does not challenge its finding, that Congress over a period of decades attempted to correct by race-neutral means the problem of too few minority subcontractors for government construction contracts, and only after it continued to find discriminatory effects did it first implement a race-conscious remedy. See Adarand IV, 965 F. Supp. at 1582-83; see also Croson, 488 U.S. at 507 (noting the finding in Fullilove that "Congress . . . carefully examined and rejected race-neutral alternatives before enacting the MBE set-aside").(20) That finding is law of the case and is not clearly erroneous. See Agostini, 521 U.S. at 236; McIlravy, 204 F.3d at 1034-35. The long history of discrimination in, and affecting, the public construction procurement market--despite the efforts dating back at least to the enactment in 1958 of the SBA to employ race-neutral measures--places a formidable burden on both existing and would-be minority participants and thus justifies race-conscious action to address a decidedly racial disparity.
Again, the situation has since changed dramatically.(21) A comparison of that previous SCC program with the new federal regulations under TEA-21 is particularly instructive. The current, revised regulations instruct recipients that "[y]ou must meet the maximum feasible portion of your overall goal by using race-neutral means of facilitating DBE participation," 49 C.F.R. § 26.51(a) (2000); see also 49 C.F.R. § 26.51(f) (2000) (if a recipient can meet its overall goal through race-neutral means, it must implement its program without the use of race-conscious contracting measures), and enumerate a list of race-neutral measures, see 49 C.F.R. § 26.51(b) (2000). The current regulations also outline several race-neutral means available to program recipients including helping overcome bonding and financing obstacles, providing technical assistance, establishing programs to assist start-up firms, and other methods. See 49 C.F.R. § 26.51(b). We therefore are dealing here with revisions that emphasize the continuing need to employ non-race-conscious methods even as the need for race-conscious remedies is recognized. The record before us does not indicate whether or not FLHP considered race-neutral measures prior to resorting to the SCC. This absence weighs strongly against any finding of narrow tailoring. See Adarand III, 515 U.S. at 237-38; Croson, 488 U.S. at 507. The district court was therefore correct, given the information before it at the time, that the SCC program was not narrowly tailored, and should the government reinstitute the revised program without considering race-neutral measures similar to those outlined in 49 C.F.R. § 25.51(a) and (b) (2000), that program too would be insufficiently narrowly tailored.
The duration of a particular company's DBE status is limited by statute and regulation to approximately ten-and-one-half years under the § 8(a) certification program. See 15 U.S.C. §§ 634(b)(6), 636(j)(10)(C)(i), 637(a), (d); 13 C.F.R. § 124.110 (1996); 13 C.F.R. § 124.2 (2000). Moreover, each participant in the § 8(a) program is required to annually submit financial and other information, on the basis of which the SBA reevaluates and may "graduate" a small disadvantaged business from the program as no longer qualified (e.g., because the criteria of economic disadvantage are no longer met). See 15 U.S.C. §§ 636(j)(10)(G), 637(a)(6)(B), (C). The § 8(a) program's inherent time limit and graduation provisions ensure that it, like the program upheld in Paradise, is carefully designed to "endure[] only until . . . the discriminatory impact" has been eliminated; once a DBE loses its economic disadvantage, it loses its certification. Paradise, 480 U.S. at 178. As far as we can ascertain from the regulations previously in effect, the § 8(d) program did not have an analogous individual time limit. Therefore, insofar as the 1996 SCC program relied on § 8(a) criteria, those criteria increased the narrow tailoring of the program. However, insofar as the program relied on § 8(d) criteria, through state certifications,(22) we discern no evidence that the specific criteria of DBE eligibility provide a temporal limit to the program. Thus, insofar as the district court suggested that an SCC program based on § 8(a) criteria would be insufficiently narrowly tailored, we disagree; the court's skepticism about the fatality in fact of strict scrutiny in the narrow-tailoring context is contrary to the Supreme Court's own pronouncements in both Adarand III, 515 U.S. at 237, and Croson, 488 U.S. at 509.
In this respect, too, we note that the government has modified its unconstitutional practices. The current § 8(d) program regulations specifically incorporate the certification requirements from the Small Business Administration regulations implementing the § 8(a) program. See 48 C.F.R. § 19.001 (2000) (incorporating certification requirements of 13 C.F.R. pt. 124, subpt. B); 13 C.F.R. § 124.1002(a) (2000) (incorporating § 8(a) criteria from 13 C.F.R. pt. 124, subpt. A). The regulations incorporated into the § 8(d) program provide for a certification of a business as socially and economically disadvantaged for three years after either the initial certification or other administrative determination. See 13 C.F.R. § 124.1014 (2000). If a business wishes to remain certified for longer than three years, it must "submit a new application and receive a new certification." Id. § 124.1014(c).(23) Therefore, with regard to appropriate limitations on duration, the current DBE certification programs are narrowly tailored.
The 1996 SCC program, providing a subsidy for the use of DBEs, is certainly more flexible than the set-asides considered in either Fullilove or Croson because the program is not mandatory. It does not require the use of DBEs in subcontracting against the will of the prime contractor. See Adarand IV, 965 F. Supp. at 1583 (finding that the prime contractor's choice to avail itself of the SCC is "more flexible than the 'rigid racial quota' struck down in Croson, 488 U.S. at 499, and the 10 percent set aside upheld in Fullilove, 448 U.S. at 513-14").(24) Moreover, the 1996 SCC program incorporates an additional element of flexibility--"the availability of waiver," Paradise, 480 U.S. at 171--because any prime contractor is free not to take advantage of the clause and will never be required to make a "gratuitous" choice of subcontractors, id. at 178. With regard to flexibility, the 1996 program passes muster under a narrow-tailoring analysis.
We agree in principle that the 1996 SCC program would be more narrowly tailored had the CFLHD conducted an inquiry into the scope of discrimination within the region it administers as the current regulations mandate.(25) However, the district court's ensuing conclusion appears to stem from a premise that a classification, to be narrowly tailored, must not only include minority individuals who have themselves suffered discrimination, but must also automatically include all non-minority individuals who have suffered disadvantage as well. Cf. Fullilove, 448 U.S. at 486 ("There has been no showing in this case that Congress has inadvertently effected an invidious discrimination by excluding from coverage an identifiable minority group that has been the victim of a degree of disadvantage and discrimination equal to or greater than that suffered by the groups encompassed by the MBE program."). Requiring that degree of precise fit would again render strict scrutiny "fatal in fact." Id. at 507 (Powell, J., concurring). We hold that such fatality is inconsistent with Adarand III, which re-affirmed Paradise, in its declaration that strict scrutiny was not fatal in fact. See Adarand III, 515 U.S. at 237. There can be a permissible middle ground in appropriate circumstances between the entirely individualized inquiry of a Title VII lawsuit, for example, and an unconstitutionally sweeping, race-based generalization. Indeed, the police officers receiving the benefit of the promotion policy in Paradise were not required to prove that they themselves individually were victims of past discrimination.(26)
As a final matter, inasmuch as Adarand III suggests that an additional "unresolved question[]" concerning one of "the details of the complex regulatory regimes," 515 U.S. at 238, bears on the constitutionality of the SCC program, we address that question now: namely, whether there are differing definitions of economic disadvantage under § 8(a) and § 8(d). The 1996 regulations establish that § 8(a) certification requires, for determination of economic disadvantage, comparison with "others in the same or similar line of business who are not socially disadvantaged." 13 C.F.R. § 124.106(a) (1996). Subsection 8(d) certification, however, apparently requires comparison with "others in the same or similar line of business" generally, presumably with all others, socially disadvantaged or not. 13 C.F.R. § 124.106(b) (1996). Because under 1996 programs based on § 8(d) economic disadvantage is to be presumed for minorities, the § 8(d) comparative analysis would appear to arise only in the event of either a challenge to the presumption in the case of a particular minority DBE, or application for DBE status by a socially-disadvantaged non-minority subcontractor (the classic example being the white subcontractor from rural Appalachia). We are unable to discern the constitutional relevance of these two slightly different methods of comparison.(27) Moreover, the distinction between the two has disappeared in the current version of the regulations. The current regulation retains the more precise definition previously applicable to the § 8(a) program, requiring a comparison of the applicant to those who are not socially disadvantaged. See 13 C.F.R. § 124.104(a) (2000); see also 48 C.F.R. § 19.001 (2000) (incorporating the definitions of "small disadvantaged business concern" contained in 13 C.F.R. pt. 124, subpt. B); 13 C.F.R. § 124.1002(a) (2000) (incorporating 13 C.F.R. pt. 124, subpt. A, in determining social and economic disadvantage).
As a final matter, the government argues that we should remand this case in light of a pending, potentially related lawsuit originally filed under the name Adarand Constructors, Inc. v. Romer, No. CIV. A. 97-K-1351 (D. Colo.) (filed June 26, 1997).(28) Romer involves a challenge by plaintiff in the instant case to use of race-conscious policies in highway construction projects by CDOT. Adarand has conceded that its challenge in the instant case is to "the federal program, implemented by federal officials," and not to the letting of federally-funded construction contracts by state agencies. (Appellee's Br. at 24 n.23.) We do not have before us a sufficient record to enable us to evaluate the separate question of CDOT's implementation of race-conscious policies. The propriety of potential consolidation of the instant action and Romer following our remand is a question to be considered by the district court in the first instance, should that question arise.
As noted, several statutes are implicated in this case, notably the Small Business Act of 1958 ("SBA"), Pub. L. No. 85-536, 72 Stat. 384, as amended, 15 U.S.C. §§ 631 et seq., § 106(c) of the Surface Transportation and Uniform Relocation Assistance Act of 1987 ("STURAA"), Pub. L. No. 100-17, 101 Stat. 132, and § 1003(b) of the Intermodal Surface Transportation Efficiency Act of 1991 ("ISTEA"), Pub. L. No. 102-240, 105 Stat. 1914, the Transportation Equity Act for the 21st Century of 1998 ("TEA 21"), Pub. L. No. 105-178, 112 Stat. 107, 113, as well as their accompanying administrative regulations. In the discussion that follows, we outline the statutory and regulatory scheme as it was at the time of the first and second district court decisions.(29) Then we discuss the relevant changes in that scheme after 1997.
Subsection 8(d)(1) of the SBA states "[i]t is the policy of the United States that small business concerns, and small business concerns owned and controlled by socially and economically disadvantaged individuals, . . . shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency." 15 U.S.C. § 637(d)(1).(30) "Socially disadvantaged individuals" are defined as "those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities." 15 U.S.C. § 637(a)(5). The SBA further defines "economically disadvantaged individuals" as "those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged." 15 U.S.C. § 637(a)(6)(A).(31)
15 U.S.C. § 637(d)(2) requires that all federal contracts, with certain exceptions not relevant here, contain a clause stating it is the government's policy for small disadvantaged businesses to have "the maximum practicable opportunity to participate" as contractors or subcontractors. See 15 U.S.C. § 637(d)(3). The required clause includes the following language: "The contractor shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the Administration pursuant to section 8(a) of the Small Business Act [15 U.S.C. 637(a)]." 15 U.S.C. § 637(d)(3)(C).(32)
15 U.S.C. § 644(g)(1) provides for a government-wide goal of 5% minimum minority business participation calculated on the basis of "the total value of all prime contract and subcontract awards for each fiscal year." (33) The Federal Highway Administration appears to have adopted, pursuant to 15 U.S.C. § 644(g)(2), goals of 12-15% participation for the period of time pertinent to this litigation. (Appellants' App. at 187.) These goals are aspirational rather than mandatory and must "realistically reflect the potential" of small disadvantaged businesses to perform subcontracts. See 15 U.S.C. § 644(g)(2), (h)(1). Section 644(h) further mandates annual reports to the Administration and Congress on the results of government agency efforts to increase contracting participation by small businesses, including those owned and controlled by socially and economically disadvantaged individuals.
The § 8(a) program provides numerous benefits to disadvantaged businesses aside from eligibility for the SCC program.(34) Eligibility requires "small" size and 51% ownership by individuals socially and economically disadvantaged. See 13 C.F.R. § 124.103. Subsection 8(a) regulations incorporate a presumption that enumerated minorities are socially disadvantaged, see 13 C.F.R. § 124.105(b)(1), and others can prove social disadvantage by clear and convincing evidence, see id. § 124.105(c). The presumption of disadvantage is in theory rebuttable by a third party. See 49 C.F.R. § 23.69. All businesses must separately prove economic disadvantage. See id. § 124.106(a). Eligibility for the § 8(a) program confers an automatic presumption of disadvantage under § 8(d). See 15 U.S.C. § 637(d)(3)(C).
The relevant portions of § 8(d) in themselves require only the inclusion of a provision in federal contracts stating the government's policy of maximizing contracting opportunities for small businesses, including those owned and controlled by socially and economically disadvantaged individuals. See 15 U.S.C. § 637(d)(1)-(3).(35) Subsection (d) is relevant to this litigation, however, insofar as the definition set forth therein serves as a basis for certifying small businesses as disadvantaged for purposes of compensating prime contractors under the SCC. See 49 C.F.R. § 23.53.(36) Like § 8(a), § 8(d) includes language instructing contractors to afford a presumption of social disadvantage based on race. See id. The Court stated that certain regulations based on § 8(d) "appear[] to require an individualized, although 'less restrictive,' showing of economic disadvantage." Adarand III, 515 U.S. at 207 (quoting 13 C.F.R. § 124.106(b)). However, other regulations provide for presumptions of both social and economic disadvantage. See Adarand III, 515 U.S. at 207-08 (citing 48 C.F.R. §§ 19.011, 19.703(a)(2)). The Court was thus "left with some uncertainty as to whether participation in the [§] 8(d) subcontracting program requires an individualized showing of economic disadvantage." Adarand III, 515 U.S. at 208.(37) Both presumptions of disadvantage are theoretically rebuttable by a third party. (See Appellants' App. at 131.)
The particular means of implementation of the various statutory goals and directives at issue in this litigation is the SCC. This clause provides a financial bonus of up to 10% of an approved subcontract (no more than 1.5% or 2% of the original contract, depending on how many DBEs are employed) to a prime contractor in return for employing a DBE. (See Appellants' App. at 55-56.)(38) Subcontractors must be certified as DBEs by "the SBA, a state highway agency, or some other certifying authority acceptable to the contracting officer" pursuant to the "[§] 8(a) or [§] 8(d) program, or certification by a State under the DOT regulations." Adarand III, 515 U.S. at 209-10.
Of the regulations implementing § 8(a) of the SBA, 13 C.F.R. §§ 124.1 et seq.,(39) two regulations--those defining social and economic disadvantage--are relevant to this litigation and differ significantly from their 1996 counterparts. The most extensive changes were made in 1998 and are present in the current regulations.
Regarding the allocation of subcontracts to DBEs, the current regulations explicitly prohibit the use of quotas. See id. § 26.43(a). Similarly, the current regulations prohibit use of set-asides except in "limited and extreme circumstances . . . when no other method could be reasonably expected to redress egregious instances of discrimination." Id. § 26.43(b). Although acknowledging that ISTEA and TEA-21 set a goal of 10% DBE participation in government contracts, the current regulations term this "an aspirational goal at the national level," id. § 26.41(b), which "does not authorize or require recipients to set overall or contract goals at the 10 percent level, or any other particular level," id. § 26.41(c).(40)
In November 1997, before the discontinuation of its use, the SCC was revised by the addition of a new section(41) which creates further conditions of eligibility for the program. (See id. Attach. 2 (new section of the SCC).) To begin with, subject to modification based on DBE availability, at least 10% of the prime contract must go to DBEs for SCC eligibility. If a DBE subcontractor is hired, that DBE may only contract out to non-DBEs "for onsite work . . . incidental to, and necessary for the accomplishment of," the subcontract, in an amount not to exceed 50 percent of the value of the DBE's subcontract. (Id. at 2.) In addition to the 1.5-2% cap on the total amount of the prime contract that may be awarded pursuant to the SCC, the new section adds a further cap of $50,000 if subcontracting to one DBE and $100,000 if subcontracting to more than one DBE.
1. The principal focus of Adarand III was not an analysis of the particular statutes and regulations before the Court under its newly-announced standard, but the far more abstract question of whether "benign" race-conscious programs are subject to the "strict scrutiny" doctrine, a question which the majority answered in the affirmative. See Adarand III, 515 U.S. at 225-27. In its enunciation of the strict scrutiny standard and its overruling of Metro Broadcasting, the Court accorded very little attention to the application of the strict scrutiny test to the particular programs at issue in this case.
2. We have therefore requested and received supplementary briefing from the parties on intervening changes in the statutory and regulatory scheme at issue in the instant action.
3. Although Adarand also seeks "such other and further relief as to the Court seems just and equitable," this highly general language does not constitute a prayer for retrospective relief under the circumstances of this case. (Appellants' App. at 10.) Moreover, on appeal Adarand seeks to uphold the district court's grant of summary judgment and declaratory and injunctive relief and has not filed a cross-appeal seeking damages or another form of retrospective relief.
4. Thus, we refuse the government's invitation to ignore the SCC program by virtue of its citation to a March 29, 2000 memorandum from the Manager of the Federal Lands Program indicating that the SCC is no longer in use in federal highway construction procurement contracts. We likewise reject the government's argument, relying on Lawrence v. Chater, 516 U.S. 163, 165-66 (1996), that we must remand this case to the district court for consideration of intervening statutory and regulatory changes. The government's reliance on Lawrence is misplaced: That case involved the Supreme Court's exercise of its power to "grant certiorari, vacate the judgment below, and remand the case" to a "lower federal court" in light of intervening regulatory changes, and not the power of a lower federal court to decide a case on remand from the Supreme Court. Id. (emphasis added). In the present case, the parties have briefed intervening changes in the law, there are no disputed factual issues, and we see no reason to delay this already protracted litigation by remanding to the district court, especially considering the district court's statement that it would be "difficult to envisage a race-based classification" that would ever be narrowly tailored, thereby effectively pronouncing strict scrutiny fatal in fact, Adarand IV 965 F. Supp. at 1580, a view which we reject in the discussion that follows.
5. The relevant statutes have remained unchanged in all respects material to this litigation from 1992 to the present, except as noted in the Appendix to this opinion.
6. We note that the Adarand III Court's qualified repudiation of Fullilove would appear to leave in place other aspects of that case, most notably its factual determinations regarding congressional findings and the legislative history of the SBA discussed in the Chief Justice's opinion and further elaborated upon in the concurring opinion of Justice Powell. See Croson, 488 U.S. at 488 (Op. of O'Connor, J.) ("In reviewing the legislative history behind the Act, the principal opinion focused on the evidence before Congress that a nationwide history of past discrimination had reduced minority participation in federal construction grants." (citing Fullilove, 448 U.S. at 458-67 (Op. of Burger, C.J.)); id. at 489 (citing the concurring opinion of Powell, J., in Fullilove). Thus, where Fullilove's factual findings bear on the factual underpinnings of this case, we so note in the discussion that follows. The separate question of whether those findings are adequately supported by evidence, pursuant to Adarand III's application of Croson to federal race-conscious programs, is one we consider at length in Subsection B below.
7. Despite overruling Metro Broadcasting and casting doubt on Fullilove, the majority opinion in Adarand III firmly rejected the suggestion "that any Member of this Court has repudiated in this case his or her previously expressed views on the subject" of Congress's powers under § 5 of the Fourteenth Amendment. Adarand III, 515 U.S. at 231.
8. Croson cannot be read, as Adarand would have it, as standing for the proposition that findings of "the present effects of past discrimination in the construction industry," 488 U.S. at 498 (citation omitted), are automatically insufficient to justify remedial action. This characterization of Croson overlooks a very significant difference between the Richmond Plan at issue in Croson and the congressional enactments at issue in the instant case. The City of Richmond had no authority to remedy the present effects of past discrimination in the entire construction industry nationally, and the City was not permitted to simply infer that congressional findings as to the entire industry applied equally to the particular market within its jurisdiction. See id. at 504-05. The remediation of nation-wide problems, however, is particularly within the purview of Congress, and findings of industry-wide discrimination are precisely what is relevant to a federal decision to undertake remedial action. See id. at 490, 504.
9. Contractors Association of Eastern Pennsylvania, Inc. v. City of Philadelphia, 6 F.3d 990 (3d Cir. 1993), cited by appellee, is distinguishable both in that it involved a city-based rather than a nationwide program, and in that the program at issue was based on far scantier evidence than that available in the instant case.
10. The parties and their respective amici curiae differ sharply as to the relevant geographical scope to be considered in assessing the government's basis in evidence for concluding that race-conscious remedial action is necessary. Adarand and its amici argue based on Croson for the necessity of findings regarding both discrimination and the availability of qualified DBEs in a particular local market as a necessary prerequisite to any government action. We disagree, concluding that the absence of such findings is more properly addressed in this case under the rubric of narrow tailoring. Quite apart from the question of Congress's power under § 5 of the Fourteenth Amendment left unresolved by the Adarand III majority, see Adarand III, 515 U.S. at 230-31, the compelling interests to be addressed by Congress, whether under the Commerce Clause, Spending Clause, or Fourteenth Amendment, are necessarily different in geographic scope than those properly addressed by a city. See, e.g., Croson, 488 U.S. at 505 (focusing on lack of "identified discrimination in the Richmond construction industry"); Concrete Works, 36 F.3d at 1520 (identifying "the six-county Denver Metropolitan Statistical Area" as one acceptable geographical region for inquiry into an affirmative action measure by the City and County of Denver). That said, Adarand's concern with the availability of DBEs in a particular market is certainly an important one, see Croson, 488 U.S. at 502, and, as discussed below, the lack of evidence provided by the government regarding local availability and the government's concomitant failure to tailor contracting regulations accordingly constitute one of the chief barriers to finding the previous statutory and regulatory scheme narrowly tailored.
11. Post-enactment evidence is particularly relevant when, as here, it was gathered specifically to respond to the Supreme Court's Adarand III decision, which applied a new compelling interest standard to the federal government's affirmative action programs. See Appendix--The Compelling Interest for Affirmative Action in Federal Procurement, 61 Fed. Reg. 26,050 (1996) (noting purpose of responding to Adarand III).
12. In the discussion that follows, we take judicial notice of the content of hearings and testimony before the congressional committees and subcommittees cited by the government. Furthermore, we note in passing that there is an even more substantial body of legislative history supporting the compelling interest in the present case than that cited by the government. See, e.g., Barriers to Full Minority Participation in Federally Funded Highway Contracts: Hearing Before a Subcomm. of the House Comm. on Gov't Operations, 100th Cong. (April 1, 1998); Problems Facing Minority and Women-Owned Small Businesses in Procuring U.S. Government Contracts: Hearing Before the Commerce, Consumer, & Monetary Affairs Subcomm. of the House Comm. on Gov't Operations, 103d Cong. (July 12, 1993).
13. Lending discrimination alone of course does not justify action in the construction market. See Croson, 488 U.S. at 510 (Op. of O'Connor, J.) (noting a municipality's alternative remedy of taking direct action against discrimination in the provision of credit). However, the persistence of such discrimination, which is already unlawful under federal law, supports the assertion that the formation, as well as utilization, of minority-owned construction enterprises has been impeded.
14. We reject the decidedly vague urgings of Adarand's amici curiae to reject disparity studies generally as biased and/or insufficiently reliable. Certainly, the conclusions of virtually all social scientific studies may be cast into question by criticism of their choice of assumptions and methodologies. The very need to make assumptions and to select data sets and relevant variables precludes perfection in empirical social science. However, general criticism of disparity studies, as opposed to particular evidence undermining the reliability of the particular disparity studies relied upon by the government, is of little persuasive value and neither compels us to discount the disparity evidence presented in the government's appendix nor does it create "a legitimate factual dispute about the accuracy of [the government's] data." Concrete Works, 36 F.3d at 1528 (refusing to grant summary judgment because of a legitimate factual dispute about the accuracy of disparity study data). Moreover, a generalized assertion that disparity studies lack reliability is in conflict with Croson, which suggests that disparity studies are entirely relevant to an assessment of whether sufficiently strong evidence exists to support a compelling interest in a race-conscious remedy. See 488 U.S. at 501; Concrete Works, 36 F.3d at 1528 ("[O]nce credible information about the size or capacity of the firms is introduced in the record, it becomes a factor that the court should consider.").
15. Based on a comprehensive review of 1987 census data showing disproportionately low minority business ownership and receipts for minority-owned business, the U.S. Commission on Minority Business Development concluded that "minorities are not underrepresented in business because of choice or chance. Discrimination and benign neglect is the reason why our economy has been denied access to this vital resource." United States Commission on Minority Business Development, Final Report 60 (1992).
16. We disagree with Adarand's contention that the government's "Appendix I" to its motion for summary judgment (Appellants' App. at 44-53) is insufficient evidence of Congress's findings. The Appendix references and discusses the long and comprehensive legislative history and findings on discrimination in the nationwide construction contracting market. Adarand's challenge to that history is too conclusory to meet its burden under Concrete Works.
17. Adarand III called into question Fullilove's standard of review and possibly its result. However, as far as we can ascertain, nothing in Adarand III undermines the conclusion of the lead Fullilove opinion that "Congress had abundant evidence from which it could conclude that minority businesses have been denied effective participation in public contracting opportunities by procurement practices that perpetuated the effects of prior discrimination." Fullilove, 448 U.S. at 477-78 (Op. of Burger, C.J.); see also Croson, 488 U.S. at 504 ("[In the Fullilove case,] Congress was exercising its powers under § 5 of the Fourteenth Amendment in making a finding that past discrimination would cause federal funds to be distributed in a manner which reinforced prior patterns of discrimination . . . . Congress has made national findings that there has been societal discrimination in a host of fields.").
18. We likewise reject Adarand's contention that Congress must make specific findings regarding discrimination against every single sub-category of individuals within the broad racial and ethnic categories designated by statute and addressed by the relevant legislative findings. If Congress has valid evidence, for example that Asian-American individuals are subject to discrimination because of their status as Asian-Americans, it makes no sense to require sub-findings that subcategories of that class experience particularized discrimination because of their status as, for example, Americans from Bhutan. "Race" is often a classification of dubious validity--scientifically, legally, and morally. We need not impart excess legitimacy to racial classifications by taking notice of the harsh fact that racial discrimination commonly occurs along the lines of the broad categories identified: "Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities." 15 U.S.C. § 637(d)(3)(C).
19. While Paradise only assumed without deciding that strict scrutiny is the appropriate standard, see 480 U.S. at 166-67 (plurality), it nevertheless applied strict scrutiny to affirm a race-conscious relief measure, see id. at 185-86. Although the Paradise factors require some modification in order to be used for evaluating the nationwide legislative enactment and its implementing regulations and programs at issue here (as opposed to a judicial order aimed at a particular police department), they provide some general guidance on questions the Court considers relevant to the narrow tailoring inquiry. See also Adarand III, 515 U.S. at 237 (citing the opinions of Justices Brennan, Stevens, and O'Connor in Paradise "to dispel the notion that strict scrutiny is 'strict in theory, but fatal in fact'" (quoting Fullilove, 448 U.S. at 519 (Marshall, J., concurring))).
20. Although the standard of review and result of Fullilove have been called into question by Adarand III, the district court noted, in our view correctly, that a square majority of the Court in Croson cited with approval the principal opinion in Fullilove for this factual finding. We fail to see how this factual aspect of Fullilove has been impaired; Adarand offers no authority to refute the finding that three decades of race-neutral measures failed to have any appreciable effect on the exclusion of minorities from the receipt of government highway largesse. Adarand offers no evidence to rebut the district court's conclusion that Congress entertained and indeed attempted years of race-neutral measures without success before resorting to the programs at issue in this lawsuit.
21. The regulatory changes discussed below resulted from several years of study and consideration of Croson and Adarand III. See 64 Fed. Reg. 5096, 5101-03 (1999) (discussing how regulatory changes address the requirements of narrow tailoring).
22. Notably, Gonzalez was certified through such a state program in the present case, belying the government's argument that there was no evidence of unconstitutional state certifications under the version of § 8(d) in place at the time this litigation commenced.
23. Although the § 8(a) program provides for annual rather than tri-annual review of DBE certification, for purposes of the "duration" prong of the narrow-tailoring inquiry, that difference is not so glaring as to require striking down the § 8(d) program; rather, it is the periodic reevaluation of disadvantaged status that renders this aspect of the program narrowly tailored because in that way, the program will not last longer than the situation it seeks to correct.
24. None of the parties in this case contend that SBA § 8(d)(4), 15 U.S.C. § 637(d)(4), pertains to the SCC. However, even if § 8(d)(4) were relevant here, that would not change our conclusion that the SCC is not mandatory in nature. Section 8(d)(4)(E) informs government agencies letting contracts that they are "authorized to provide such incentives as such Federal agency may deem appropriate in order to encourage such subcontracting opportunities as may be commensurate with the efficient and economical performance of the contract." 15 U.S.C. § 637(d)(4)(E) (emphasis added). This language demonstrates that § 8(d)(4) merely authorizes, but does not require, the use of incentives (of whatever type) to further the aspirational goals of increased participation in government contracts by socially and economically disadvantaged individuals. The fact that the FLHP has discontinued use of the SCC further demonstrates that § 8(d)(4) in no way requires an incentive clause in federal highway transportation contracts.
25. Nonetheless, the geographic scope of the remedial powers of a local government, as in Croson, and that of Congress's remedial powers under § 5 of the Fourteenth Amendment differ. See Croson, 488 U.S. at 488 (Op. of O'Connor, J.). In Croson, the City ignored the fact
26. Although the viability of Fullilove is uncertain, the Fullilove majority rejected a very similar overinclusiveness challenge to the 1977 10% MBE set-aside:
27. We reject the contention that two slightly different definitions of economic disadvantage for purposes of two different certification methods create uncertainty as to who is a DBE, thus necessarily precluding any finding of narrow tailoring.
28. Decisions arising out of the Romer litigation include: Adarand Constructors, Inc. v. Romer, 174 F.R.D. 100 (D. Colo. 1997) (denying the federal government's motion to intervene); Adarand Constructors, Inc. v. Romer, No. 97-1285, 1999 WL 770176 (10th Cir. Sept. 29, 1999) (unpublished) (permitting intervention by the federal government); and Adarand Constructors, Inc. v. Owens, No. CIV. A. 97-K-1351, 2000 WL 490690 (D. Colo. Apr. 24, 2000) (unpublished) (dismissing the governor of Colorado as a defendant).
29. The relevant language in the statutes and regulations did not change in any material way between Adarand I and Adarand IV, and therefore references to regulations are to 1991 regulations unless otherwise indicated.
30. The SCC defines Disadvantaged Business Enterprises ("DBEs") as those concerns owned and operated by socially and economically disadvantaged individuals.
31. It appears that the 1996 regulations implementing the § 8(d) certification program provide that the showing of disadvantage requires a general comparison "to others in the same or similar line of business." 13 C.F.R. § 124.106(b)(1) (1996). Justice O'Connor suggests that this distinction may have constitutional significance. See Adarand III, 515 U.S. at 238.
32. 15 U.S.C. § 637(d)(4) provides for certain additional requirements for contracts to be awarded "pursuant to the negotiated method of procurement" and exceeding certain dollar amounts. These requirements include an approved plan providing maximum opportunity for small business concerns, see id. § 637(d)(4)(D), and provision for agencies to offer incentives to encourage subcontracting opportunities for small business concerns owned and controlled by socially and economically disadvantaged individuals, see id. § 637(d)(4)(E). The parties have not addressed paragraph (4) of § 8(d) at all, and, because there is no indication from the parties that Adarand has or will bid for contracts governed by that paragraph's requirement, we do not address it in great detail.
33. Section 644(g)(1) provides in relevant part that
34. Although Adarand lacks standing to challenge the constitutionality of the § 8(a) program per se, we consider its provisions insofar as they are relevant to the use of racially-conscious presumptions in determining certification of DBEs for the SCC program challenged here.
35. There is no indication from any of the parties in their briefs or elsewhere that the particular requirements of paragraphs (4)-(6) of § 8(d) are at issue in the instant lawsuit or that Adarand has and will continue to bid for contracts or subcontracts covered by those paragraphs. See 15 U.S.C. § 637(d)(4)-(6).
36. The relevant state DBE program at the time of the contract at issue, under which Adarand's competitor was certified as a DBE, provided that "persons who are members of [specified racial/ethnic minorities] are 'rebuttably presumed' to be socially and economically disadvantaged." (Appellants' App. at 131.) Pursuant to Adarand VI, because Colorado's revised program may be inconsistent with federal requirements, we direct our inquiry to the possibility of reinstatement of the prior state DBE certification requirements, as informed by federal law and regulation.
37. As noted, those portions of § 8(d) at issue here perhaps may be more properly characterized as a requirement that a clause be included in contracts than as a discrete program. However, the Supreme Court has characterized the requirements as a discrete program, and we note that they are certainly relevant to the SCC program at issue because they inform the criteria for certification of DBE participants by state agencies.
38. The Supreme Court in Adarand III stated that "[f]ederal law requires that a subcontracting clause similar to the one used here must appear in most federal agency contracts, and it also requires the clause to state that '[t]he contractor shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and other minorities, or any other individual found to be disadvantaged by the [Small Business] Administration pursuant to section 8(a) of the Small Business Act.'" 515 U.S. at 205 (quoting 15 U.S.C. §§ 637(d)(2), (3)). However, examination of the statute reveals that 15 U.S.C. § 637, while providing for inclusion in most federal agency contracts of a clause stating that "[i]t is the policy of the United States that . . . small business concerns owned and controlled by socially and economically disadvantaged individuals, . . . shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency," 15 U.S.C. § 637(d)(3)(A), the relevant provisions of § 8(d) do not require the particular contract provision at issue here: "[m]onetary compensation . . . for awarding subcontracts to small business concerns owned and controlled by socially and economically disadvantaged individuals," Adarand III, 515 U.S. at 209 (citation omitted). Cf. 15 U.S.C. § 637(d)(4)(E). Rather, that clause, the SCC, was established administratively by the Federal Lands Highway Program ("FLHP") of the Department of Transportation ("DOT") pursuant to the FLHP's obligations under 15 U.S.C. § 644(g). (See Appellants' App. at 33.) In Adarand II, 16 F.3d at 1545-56, ("Adarand II"), we concluded that the FLHP was acting within its delegated power under § 644(g) in promulgating the SCC. The Supreme Court, in altering the equal protection standard of scrutiny applicable to federal action in Adarand III, did not disturb this statutory conclusion. Therefore it remains law of the case that the SCC constitutes an exercise of the FLHP's delegated authority under § 644(g), and we discern no clear error in that prior decision or manifest injustice sufficient to warrant overriding the law of the case doctrine. See Agostini, 521 U.S. at 236; McIlravy, 204 F.3d at 1034-35.
39. The § 8(d) program regulations are located at 48 C.F.R. pt. 19, but they specifically incorporate the definitions of "small disadvantaged business concern" contained in 13 C.F.R. pt. 124, subpt. B. See 48 C.F.R. § 19.001 (2000); 13 C.F.R. § 124.1002(a) (2000) (incorporating 13 C.F.R. pt. 124, subpt. A).
40. The term "recipient" is defined by the regulations as "any entity, public or private, to which DOT financial assistance is extended, whether directly or through another recipient, through the programs of the . . . FHWA." 46 C.F.R. § 26.5 (2000). The FLHP is such a program and therefore is a "recipient" for purposes of the relevant regulations. See 23 C.F.R. § 645.105(f) (2000).
41. It is unclear from the record whether the 1997 revision to the SCC entailed the addition of a new section or the replacement of the previous one. The revision instructs those using the SCC to "[a]dd the following [revision]," (Appellants' Supp. Br. Attach. 2 at 1), rather than replace the existing SCC, and we thus assume the 1997 revision is an addition to the SCC. However, in either case, our analysis in this opinion remains the same.
URL: http://ca10.washburnlaw.edu/cases/2000/09/97-1304.htm.