US SUPREME COURT DECISIONS

The "minority business enterprise" (MBE) provision of the Public Works Employment Act of 1977 (1977 Act) requires that, absent an administrative waiver, at least 10% of federal funds granted for local public works projects must be used by the state or local grantee to procure services or supplies from businesses owned by minority group members, defined as United States citizens "who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts." Under implementing regulations and guidelines, grantees and their private prime contractors are required, to the extent feasible, in fulfilling the 10% MBE requirement, to seek out all available, qualified, bona fide MBE's, to provide technical assistance as needed, to lower or waive bonding requirements where feasible, to solicit the aid of the Office of Minority Business Enterprise, the Small Business Administration, or other sources for assisting MBE's in obtaining required working capital, and to give guidance through the intricacies of the bidding process. The administrative program, which recognizes that contracts will be awarded to bona fide MBE's even though they are not the lowest bidders if their bids reflect merely attempts to cover costs inflated by the present effects of prior disadvantage and discrimination, provides for handling grantee applications for administrative waiver of the 10% MBE requirement on a case-by-case basis if infeasibility is demonstrated by a showing that, despite affirmative efforts, such level of participation cannot be achieved without departing from the program's objectives. The program also provides an administrative mechanism to ensure that only bona fide MBE's are encompassed by the program, and to prevent unjust participation by minority firms whose access to public contracting opportunities is not impaired by the effects of prior discrimination.

Petitioners, several associations of construction contractors and subcontractors and a firm engaged in heating, ventilation, and air conditioning work, filed suit for declaratory and injunctive relief in Federal District Court, alleging that they had sustained economic injury due to enforcement of the MBE requirement, and that the MBE provision, on its face, violated, inter alia, the Equal Protection Clause of the Fourteenth chanrobles.com-red

Page 448 U. S. 449

Amendment and the equal protection component of the Due Process Clause of the Fifth Amendment. The District Court upheld the validity of the MBE program, and the Court of Appeals affirmed.

Held: The judgment is affirmed. Pp. 448 U. S. 456-492; 448 U. S. 517-522.

584 F.2d 600, affirmed.

MR. CHIEF .JUSTICE BURGER, joined by MR. JUSTICE WHITE and MR. JUSTICE POWELL, concluded that the MBE provision of the 1977 Act, on its face, does not violate the Constitution. Pp. 448 U. S. 456-492.

(a) Viewed against the legislative and administrative background of the 1977 Act, the legislative objectives of the MBE provision and of the administrative program thereunder were to ensure -- without mandating the allocation of federal funds according to inflexible percentages solely based on race or ethnicity -- that, to the extent federal funds were granted under the 1977 Act, grantees who elected to participate would not employ procurement practices that Congress had decided might result in perpetuation of the effects of prior discrimination which had impaired or foreclosed access by minority businesses to public contracting opportunities. Pp. 448 U. S. 456-472.

(b) In considering the constitutionality of the MBE provision, it first must be determined whether the objectives of the legislation are within Congress' power. Pp. 448 U. S. 472-480.

(i) The 1977 Act, as primarily an exercise of Congress' Spending Power under Art. I, § 8, cl. 1, "to provide for the . . . general Welfare," conditions receipt of federal moneys upon the receipt's compliance with federal statutory and administrative directives. Since the reach of the Spending Power is at least as broad as Congress' regulatory powers, if Congress, pursuant to its regulatory powers, could have achieved the objectives of the MBE program, then it may do so under the Spending Power. Pp. 448 U. S. 473-475

(ii) Insofar as the MBE program pertains to the actions of private prime contractors, including those not responsible for any violation of antidiscrimination laws, Congress could have achieved its objectives under the Commerce Clause. The legislative history shows that there was a rational basis for Congress to conclude that the subcontracting practices of prime contractors could perpetuate the prevailing impaired access by minority businesses to public contracting opportunities, and that this inequity has an effect on interstate commerce. Pp. 448 U. S. 475-476.

(iii) Insofar as the MBE program pertains to the actions of state and local grantees, Congress could have achieved its objectives by use of its power under § 5 of the Fourteenth Amendment "to enforce, by appropriate legislation" the equal protection guarantee of that Amendment. Congress had abundant historical basis from which it could conclude chanrobles.com-red

Page 448 U. S. 450

that traditional procurement practices, when applied to minority businesses, could perpetuate the effects of prior discrimination, and that the prospective elimination of such barriers to minority-firm access to public contracting opportunities was appropriate to ensure that those businesses were not denied equal opportunity to participate in federal grants to state and local governments, which is one aspect of the equal protection of the laws. Cf., e.g., Katzenbach v. Morgan, 384 U. S. 641; Oregon v. Mitchell, 400 U. S. 112. Pp. 448 U. S. 476-478.

(iv) Thus, the objectives of the MBE provision are within the scope of Congress' Spending Power. Cf. Lau v. Nichols, 414 U. S. 563. Pp. 448 U. S. 479-480.

(c) Congress' use here of racial and ethnic criteria as a condition attached to a federal grant is a valid means to accomplish its constitutional objectives, and the MBE provision, on its face, does not violate the equal protection component of the Due Process Clause of the Fifth Amendment. Pp. 448 U. S. 480-492.

(i) In the MBE program's remedial context, there is no requirement that Congress act in a wholly "color-blind" fashion. Cf., e.g., Swann v. Charlotte-Mecklenberg Board of Education, 402 U. S. 1; McDaniel v. Barresi, 402 U. S. 39; North Carolina Board of Education v. Swann, 402 U. S. 43. Pp. 448 U. S. 482-484.

(ii) The MBE program is not constitutionally defective because it may disappoint the expectations of access to a portion of government contracting opportunities of nonminority firms who may themselves be innocent of any prior discriminatory actions. When effectuating a limited and properly tailored remedy to cure the effects of prior discrimination, such "a sharing of the burden" by innocent parties is not impermissible. Franks v. Bowman Transportation Co., 424 U. S. 747, 424 U. S. 777. Pp. 448 U. S. 484-485.

(iii) Nor is the MBE program invalid as being underinclusive in that it limits its benefit to specified minority groups, rather than extending its remedial objectives to all businesses whose access to government contracting is impaired by the effects of disadvantage or discrimination. Congress has not sought to give select minority groups a preferred standing in the construction industry, but has embarked on a remedial program to place them on a more equitable footing with respect to public contracting opportunities, and there has been no showing that Congress 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. Pp. 448 U. S. 485-486. chanrobles.com-red

Page 448 U. S. 451

(iv) The contention that the MBE program, on its face, is overinclusive in that it bestows a benefit on businesses identified by racial or ethnic criteria which cannot be justified on the basis of competitive criteria or as a remedy for the present effects of identified prior discrimination is also without merit. The MBE provision, with due account for its administrative program, provides a reasonable assurance that application of racial or ethnic criteria will be narrowly limited to accomplishing Congress' remedial objectives, and that misapplications of the program will be promptly and adequately remedied administratively. In particular, the administrative program provides waiver and exemption procedures to identify and eliminate from participation MBE's who are not "bona fide," or who attempt to exploit the remedial aspects of the program by charging an unreasonable price not attributable to the present effects of past discrimination. Moreover, grantees may obtain a waiver if they demonstrate that their best efforts will not achieve or have not achieved the 10% target for minority firm participation within the limitations of the program's remedial objectives. The MBE provision may be viewed as a pilot project, appropriately limited in extent and duration and subject to reassessment and reevaluation by the Congress prior to any extension or reenactment. Pp. 448 U. S. 486-489.

(d) In the continuing effort to achieve the goal of equality of economic opportunity, Congress has latitude to try new techniques such as the limited use of racial and ethnic criteria to accomplish remedial objectives, especially in programs where voluntary cooperation is induced by placing conditions on federal expenditures. When a program narrowly tailored by Congress to achieve its objectives comes under judicial review, it should be upheld if the courts are satisfied that the legislative objectives and projected administration of the program give reasonable assurance that the program will function within constitutional limitations. Pp. 448 U. S. 490-492.

MR. JUSTICE MARSHALL, joined by MR. JUSTICE BRENNAN and MR. JUSTICE BLACKMUN, concurring in the judgment, concluded that the proper inquiry for determining the constitutionality of racial classifications that provide benefits to minorities for the purpose of remedying the present effects of past racial discrimination is whether the classifications serve important governmental objectives and are substantially related to achievement of those objectives, University of California Regents v. Bakke, 438 U. S. 265, 438 U. S. 359 (opinion of BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ., concurring in judgment in part and dissenting in part), and that, judged under this standard, the 10% minority set-aside provision of the 1977 Act is plainly constitutional, the racial classifications being substantially related to the achievement of the important and chanrobles.com-red

Page 448 U. S. 452

congressionally articulated goal of remedying the present effects of past racial discrimination. Pp. 448 U. S. 517-521.

BURGER, C.J.,announced the judgment of the Court and delivered an opinion, in which WHITE and POWELL, JJ., joined. POWELL, J., filed a concurring opinion, post, p. 448 U. S. 495. MARSHALL, J., filed an opinion concurring in the judgment, in which BRENNAN and BLACKMUN, J.J., joined, post p. 448 U. S. 517. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 448 U. S. 522. STEVENS, J., filed a dissenting opinion, post, p. 448 U. S. 532. chanrobles.com-red

Page 448 U. S. 453