U.S. Supreme Court Limits Racial Preferences in Awarding Government Contracts

Date June 12, 1995

In the case ofAdarand Constructors v. Peña, the U.S. Supreme Court ruled that all racial preferences in government-financed programs were inherently suspect and must be assessed using the standard of “strict scrutiny,” which meant that they were unconstitutional unless narrowly tailored to promote a compelling governmental interest.

Also known asAdarand Constructors v. Peña, 515 U.S. 200

Locale Washington, D.C.

Key Figures

• Randy Pech (b. 1954), owner of Adarand Constructors in Colorado Springs, Colorado
• Sandra Day O’Connor (b. 1930), associate justice of the United States, 1981–2006
• John Paul Stevens (1920–2019), associate justice of the United States, 1975–2010
• Ruth Bader Ginsburg (1933–2020), associate justice of the United States, 1993–2020
• Antonin Scalia (1936–2016), associate justice of the United States, 1986–2016
• Clarence Thomas (b. 1948), associate justice of the United States beginning in 1991

Summary of Event

The U.S. Supreme Court’s landmark decision in the 1995 case of Adarand Constructors v. Peña is one in a long series of Court decisions relating to affirmative action—that is, policies designed to increase the participation of underrepresented minorities and women in business, employment, and education. Although the Civil Rights Act of 1964 explicitly disallowed the use of racial and ethnic preferences in hiring, the agencies of the federal government soon began to enforce the statute by requiring that employers and schools achieve particular statistical outcomes. In the Public Employment Act of 1977, the U.S. Congress for the first time utilized the quantitative approach, mandating that contracts for public works projects include, whenever feasible, a 10 percent “set-aside” for minority business enterprises (MBEs).

An angry group of nonminority contractors went to federal court to challenge the set-asides as a form of unconstitutional “reverse discrimination” against white males. Referring to the precedent of Bolling v. Sharpe (1954), the plaintiffs argued that the due process clause of the Fifth Amendment to the U.S. Constitution contains an implicit “equal protection component” that protects all persons equally. Their hopes were dashed, however, when the Supreme Court, in Fullilove v. Klutznick (1980), voted six to three to uphold MBE set-asides as a “reasonable necessary means of furthering the compelling governmental interest” in redressing the discrimination that had long affected minority contractors. This ruling encouraged substantial expansion of minority set-aside provisions by the federal government as well as at the state and local levels.

Randy Pech, the white owner of Adarand Constructors in Colorado Springs, Colorado, was one of many entrepreneurs who was disappointed by the Fullilove decision. Pech’s company, which specialized in building guardrails on public highways and bridges, had been founded in 1976 by Pech and Tom Adams (the name Adarand was a combination of the founders’ names). By the mid-1980s, Adarand Constructors had grown to become the most successful guardrail company in Colorado, but Pech was infuriated to observe that because of minority-owner preferences, his company was losing 10 to 15 percent of the jobs for which it was the low bidder. Testifying at hearings, Pech emerged as a vociferous opponent of racial preferences. He even considered transferring ownership of Adarand to his wife, Val Pech, so that the company would qualify as a disadvantaged enterprise, but he eventually concluded that such a maneuver, even if commonly practiced, would be fraudulent.

Because of the conservative judicial appointments of President Ronald Reagan, the Supreme Court was gradually taking a more skeptical view of government requirements for remedial preferences. In the case of Richmond v. J. A. Croson Co. (1989), a five-to-four majority of the Court overturned a city council’s plan mandating that at least 30 percent of the value of city contracts be awarded to MBEs. Justice Sandra Day O’Connor, the swing vote in the case, wrote in the majority opinion that set-aside plans by state and local governments must be based on a showing of past discrimination, not simply reliance on general societal discrimination, and she insisted that they be assessed by the demanding standard of “strict scrutiny.” The Croson ruling, however, applied only to state and local programs under the Fourteenth Amendment, and thus it was uncertain whether the Court would evaluate the constitutionality of federal programs by the same standards.

In 1989, Adarand Constructors submitted the lowest bid to subcontract the guardrail work for a large project in the San Juan National Forest—a project sponsored by the Federal Highway Administration, which was part of the Department of Transportation (DOT). Instead of accepting the low bid, the prime contractor selected a minority-owned company, the Gonzales Construction Company. In federal court, Pech sued the DOT and its head, Federico Peña, arguing that the Croson principles should apply to the federal government under the Fifth Amendment. As the case was being argued in lower federal courts, however, the Supreme Court decided the similar case of Metro Broadcasting v. F.C.C. (1990), with the justices voting five to four to uphold federal preferences designed to increase Black ownership of broadcast licenses. The ruling appeared to endow Congress with almost unlimited discretion to authorize race-based preferences. Applying this precedent, two lower federal courts ruled against Pech.

When the case reached the Supreme Court, however, in Adarand Constructors v. Peña, the justices decided, in a five-to-four vote, that federally financed set-asides were in the same constitutional category as state and local mandates, thereby overturning the Metro Broadcasting ruling. The impact of this decision was to apply the demanding test of strict scrutiny to federal programs that disadvantaged nonminority applicants because of race. This meant, according to Justice O’Connor’s opinion for the Court, that all governmental race-conscious classifications must be “subjected to detailed judicial inquiry to ensure that the personal right to equal protection of the laws has not been infringed.” The two most conservative justices, Antonin Scalia and Clarence Thomas, wrote concurring opinions that condemned all race preferences as unconstitutional. Scalia declared: “In the eyes of the government we are just one race here. It is American.” Thomas argued that set-asides and other preferences are patronizing and reinforce the perception that Black Americans are incapable of success based on the principle of equal opportunity.

The four dissenters, led by Justices John Paul Stevens and Ruth Bader Ginsburg, argued that the history of racial discrimination in the United States provided a constitutional rationale for the federal government to take remedial action. Stevens argued that when Congress authorizes benign race-conscious measures, the appropriate test of review is the less demanding “important governmental objective test.” Similarly, Ginsburg argued that the DOT program was carefully designed to achieve a valid objective and was therefore consistent with the equal protection clause of the Fourteenth Amendment. Noting that the Court’s conservative justices claimed to be opposed to judicial activism, she chided the majority for failing to allow legislatures appropriate discretion in deciding how to apply the amendment.

Significance

The Supreme Court’s ruling in Adarand Constructors v. Peña did not automatically overturn the DOT program challenged by Pech. Instead, the ruling sent the case back to the lower courts for a decision concerning whether the program was unconstitutional according to the strict scrutiny standard, which required that the program be justified by a compelling reason and be narrowly tailored to eliminate discrimination that could be proven (not just generalized bias). At the time of the ruling, nevertheless, the courts had struck down almost all policies that had been evaluated according to the rigorous test, to the extent that most law books characterized it as “strict in theory but fatal in practice.” As expected, the lower courts soon determined that the program violated the constitutional rights of nonminority contractors such as Adarand.

Eight years later, however, in the case of Grutter v. Bollinger (2003), the Supreme Court for the first time approved a less demanding application of the strict scrutiny test. The case involved the admissions policy of the University of Michigan Law School, which included preferences for members of underrepresented groups in order to enhance the “diversity” of the school’s student body. Although claiming to utilize the strict scrutiny test, the Court ruled that the admissions policy was constitutional. Writing for the five-to-four majority, Justice O’Connor argued that diversity was a compelling goal and that the policy, which guaranteed individualized consideration, was narrowly tailored. Although the Grutter decision did not directly affect public works contracts, it did suggest that the Court would likely approve of preferential programs that are not inflexible or grossly discriminatory.

Bibliography

Anderson, Terry H. The Pursuit of Fairness: A History of Affirmative Action. New York: Oxford University Press, 2004. Presents an excellent and balanced historical account of affirmative action from the beginning of racial and gender preferences to the early twenty-first century.

Bean, Jonathan J. Big Government and Affirmative Action: The Scandalous History of the Small Business Administration. Lexington: University Press of Kentucky, 2001. Critical evaluation of the Small Business Administration argues that many of its scandals have resulted from the agency’s use of gender and racial preferences, to the detriment of meritocracy.

Eastman, Terry. Ending Affirmative Action: The Case for Colorblind Justice. New York: Basic Books, 1996. Provides a historical summary of affirmative action and presents a case for ending all preferences based on race or gender, arguing for a policy of equal opportunity.

Kranz, Rachel. Affirmative Action. New York: Facts On File, 2002. Introductory research guide for students summarizes the political debate and includes a historical overview as well as a summary of important legal cases.

Leiter, Samuel. Affirmative Action in Antidiscrimination Law and Policy: An Overview and Synthesis. Albany: State University of New York Press, 2002. Examines various affirmative action programs, including their origins, growth, impacts, and future prospects.

Spann, Girardeau. Law of Affirmative Action: Twenty Five Years of Supreme Court Decisions on Race and Remedies. New York: New York University Press, 2000. Comprehensive work chronicles the Court’s rulings from DeFunis v. Odegaard (1974) to the end of the twentieth century.

Wise, Tim J. Affirmative Action: Racial Preference in Black and White. New York: Routledge, 2005. Presents a one-sided defense of racial preferences as necessary remedies for historical discrimination against minorities.