Defenders, attackers of women’s contracting regulations square off

Justice Department and Small Business Administration officials told lawmakers Wednesday that a recently proposed rule requiring agencies to prove underrepresentation before setting aside contracts for women-owned businesses was necessary to ensure the program's constitutionality. Legal advocates for women, however, accused the government of setting an unreasonable precedent.

The proposed rule is a regulatory step in developing a women's procurement program that had been mandated by Congress in 2000. The regulation would allow contracting officers to award sole-source contracts of $3 million or less ($5 million in the manufacturing sector) to women-owned small businesses in only four industries in which women were determined to be underrepresented by a RAND Corp. study. The rule also would require agencies to do an individual determination of underrepresentation before awarding a contract under the set-aside program.

Elizabeth Papez, deputy assistant attorney general in the Justice Department's Office of Legal Counsel, told the House Small Business Committee Wednesday that agencies must determine their own levels of underrepresentation because "courts require evidence of discrimination in the particular field where the program operates" in order for gender-based preference programs to be legally valid.

Legal precedents require government preference programs to satisfy varying levels of scrutiny, Papez explained. For preferences that do not depend on a recipient's race or gender, such as veterans' preferences, the government must only show that there is a rational basis for the program. Race-based preferences must satisfy "strict scrutiny," which means the government must prove that the preference is "narrowly tailored to serve a compelling government interest."

Gender-based preferences must satisfy what the Supreme Court has called "intermediate" or "heightened" scrutiny, which is more demanding than the rational-basis standard but not as severe as strict scrutiny.

Papez said that in order for a gender-based program to be upheld under intermediate scrutiny, the government would have to provide "exceedingly persuasive" justification through "genuine, nonhypothetical evidence of discrimination" in the program's economic sphere.

"It is both legally appropriate and legally prudent to require evidence of discrimination before implementing the program," Papez said.

Other experts challenged that interpretation. Jennifer Brown, vice president and legal director for Legal Momentum, a New York-based advocacy group dedicated to women's rights, called the SBA's proposed rule "preposterous" and said it goes "far beyond constitutional requirements into unrecognizable territory." Brown also said a requirement that agencies disclose their own history of discrimination was unrealistic. "What agency would voluntarily announce to the world that it had documented its on history of sex discrimination in awarding contracts?" Brown asked. "I can only imagine the rush to the courthouse the next day by disappointed contract bidders."

Denise Farris, founder of the Kansas-based Farris Law Firm, who spoke on behalf of the group Women Impacting Public Policy, cited an internal Justice Department memo which said that the proof of discrimination required even for strict scrutiny was "not that level of evidence that rises to paradise."

"The SBA has basically suggested a rule that goes beyond paradise and lands at the foot of God," Farris said.

She also argued that the SBA's logic was circular -- officials are demanding their program be able to withstand a legal challenge but "missing the fact that there never will be a legal challenge because there's no darn program in place to challenge and never will be."

Both Farris and Rep. Nydia Velázquez, D-N.Y., chairwoman of the committee, expressed concern that the exceptionally high burden on the government to prove the constitutional validity of preferences could threaten a wide range of programs affecting minority groups. "What this is basically doing is creating a 'strict scrutiny plus' standard applying to gender-based programs," said Farris, "and it's only a matter of time that it will trickle down not only to every program at the federal but also the state, country and local levels."

SBA Administrator Steven Preston said his agency is committed to implementing the program and "intends to do so in a constitutionally valid manner."