Addressing Disparities in Minority and Women-Owned Business Contracts
Approaches to addressing disparities in minority and women business contracting participation in public contracts are being handled in markedly different ways across various states.
In New Jersey, after the results of the New Jersey Disparity Study were published in January 2024 (https://www.nj.gov/treasury/pdf/New%20Jersey%20Study%20on%20Disparity%20in%20State%20Procurement%20January%202024.pdf), it was found that contracting opportunities for minority- and women-owned businesses continue to lag behind. In response, a package of legislation was introduced in the Legislature. Among the recently advanced bills are: A4586, which establishes the “Minority and Women-Owned Businesses State Contractor Remedies Act,” and A4648, which provides for State agencies to issue advanced payments to certified business enterprises awarded State contracts, along with several others.
Meanwhile, other regions of the country are moving in the opposite direction on this issue. Following the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. Pres. & Fellows of Harvard College, there has been an increase in legal challenges to race- and gender-based programs in various contexts, despite the decision being limited to academic settings. In September 2024, in Mid-America Milling Company, LLC v. U.S. Dept. of Transportation, the U.S. District Court for the Eastern District of Kentucky temporarily enjoined the DOT from mandating the use of race- and gender-based presumptions for DOT contracts impacted by federal Disadvantaged Business Enterprises (DBE) goals. Under the federal program, although anyone may qualify as socially and economically disadvantaged, certain racial groups and women are rebuttably presumed to be disadvantaged.
In this case, plaintiffs Mid-America Milling LLC and Bagshaw Trucking, Inc. sued the DOT, arguing that they lost out on several federally funded contracts to DBE firms, even when their bids were lower, because they do not receive the rebuttable presumption of disadvantage. The court issued a temporary injunction against the federal mandate because the DOT failed to provide specific evidence of discriminatory exclusion for each group to whom the race and gender presumptions would apply. The court also concluded that the DBE program lacked a “logical end point” and that the program’s “racial preferences are not tethered to a foreseeable conclusion.”
At this stage, the U.S. District Court’s ruling imposed a preliminary injunction within a limited geographic area (Kentucky and Indiana). However, the case highlights the potential for other challenges that could result in similar or wider-reaching outcomes. Whether the bills introduced in New Jersey would withstand scrutiny under the reasoning that led the U.S. District Court to strike down parts of the federal DBE program is not known at this point. Public agencies should monitor litigation in this area, as it is likely to work its way up to the Supreme Court.