Fifteen years ago, the Supreme Court's decision in Adarand Constructors, Inc. v. Pena (1995) was interpreted as a "major setback" (Rice and Mongkuo 1998, 86) for affirmative action initiatives intended to address discrimination of minority-owned businesses in federal contracting. In Adarand, the Court set a high standard of "strict scrutiny" for justification of minority preferences in federal contracts--a ruling that, according to Rice and Mongkuo (1998), would weaken and in some cases eliminate these preferences (83).
Today, however, data indicate that these fears have not materialized; levels of federal contract awards to minority-owned businesses have continued to increase (Federal Procurement Data System-Next Generation [FPDS-NG] 2011). In this article, we explain that this outcome has little to do with the success of federal agencies in meeting Adarand's strict scrutiny standard for minority preferences. Rather, agencies have continued to take advantage of the expedited contract award authorities that accompany minority preference programs--authorities that help reduce agencies' workload. As a consequence, both the Court's standards and the intent of Congress to redress past discrimination take a back seat to transaction cost considerations when agencies make minority contract awards. The continued use of these expedited authorities is to be expected, especially when, as we will show, agencies suffer from a lack of organizational contracting capacity.
Governance of diversity in federal contracting has thus become more an exercise in expedience and convenience than in recognizing and redressing disadvantage and discrimination. When agencies focus inwardly on their own interests of efficiency rather than outwardly on the public they are supposed to serve, perceptions of government's commitment to enhancing minority opportunities via federal contracting are eroded. This failure of diversity governance reflects a failure to invest in the capacity to govern--more specifically, in the capacity to contract as constituted in people and organizational processes. Unless federal agencies increase their contracting capacities, they will likely continue to rely heavily on minority preference programs, mainly for the sake of convenience.
We begin with a brief review of public sector contracting as an important function of public administration and as a means for accomplishing public policy objectives. In the discussion, we also address organizational contracting capacity; specifically, how it has been lacking in federal agencies and how it may be increased. We then review the legislative-regulatory context of policies and policy objectives related to minority contracting, along with some difficulties in their implementation. Next we turn to describe the judicial context by documenting some important court decisions that would be expected to shape those policies and their implementation in significant ways. We present data that indicates, however, that the court decisions have had apparently negligible effects. We explain this result in terms of agencies seeking to reduce their contracting workload because of inadequate capacity, and we present and discuss an illustrative case study. We conclude the article with comments on connections between diversity governance, discretion, and the capacity to contract.
In this article, we use the term small disadvantaged businesses (SDB) to refer generally to those small businesses owned by minorities and groups that are the targets of federal preferences. (1) We also limit our analysis to contracting by U.S. federal agencies, although many of the issues will apply to state and local jurisdictions as well as to government agencies in other nations.
CULTURAL COMPETENCY AND MINORITY CONTRACTING
The increasing attention during the past decade to cultural competency in public administration and management (see, for example, Benavides and Hernandez 2007; Carrizales 2010; Norman-Major and Gooden 2012; Rice 2004, 2005, 2007, 2008) provides motivation and grounding for our analysis and arguments. …