(CN) – A North Carolina program to encourage the use of minority-owned businesses on state highway construction projects is not unconstitutional, the 4th circuit ruled, citing the persistence of an informal “good old boy” network of white contractors locking black and Native American subcontractors out of the bidding process.
The federal appeals court in Richmond, Va., upheld a lower court ruling that the statute enacted in 1983 to promote the use of “small, minority, physically handicapped and women contractors” in state construction projects survived strict constitutional scrutiny.
H.B Rowe Co. challenged the statute after the state highway department rejected its 2002 bid for a project to relocate a road in Iredell County. The state alleged that Rowe had failed to make a good faith effort to work with minority-owned subcontractors and accepted a slightly higher bid.
Rowe sued the department and several state officials, claiming that the statute violated the 14th Amendment. The district court ruled for the state, finding that a 2004 study showed that the conditions that led to the statute persist.
The three-judge appellate panel agreed.
“The state’s evidence showing a gross statistical disparity between the availability of qualified African American and Native American subcontractors and the
amount of subcontracting dollars they win on public sector contracts establishes the necessary statistical foundation for upholding the minority participation goals with respect to these groups,” wrote Judge Diana Gribbon Motz.
“The surveys in the 2004 study exposed an informal, racially exclusive network that systemically disadvantaged minority subcontractors. The State could conclude with good reason that such networks exert a chronic and pernicious influence on the marketplace that calls for remedial action.”
The study found that from 2000 to 2004 “the average subcontract awarded to nonminority male subcontractors yielded more than double the dollars won by
minority subcontractors and nearly triple the dollars won by women subcontractors.”
It also revealed that during a two-year suspension of the program in the early 1990s, “prime contractors awarded substantially fewer subcontracting dollars to minority and women subcontractors on state-funded projects.”
Moreover, a telephone survey included in the report “produced evidence of an informal ‘good old boy’ network of white contractors” that locks minorities out of the process.
“Majorities of African American and Native American respondents agreed that prime contractors have higher standards for minority subtracting contractors, view minority subcontractors as being less competent than nonminority businesses, change their bidding practices when not required to hire minority subcontractors, and drop minority subcontractors after winning contracts,” Motz wrote.
“Together, these responses suggest strongly that the underutilization of African American and Native American subcontractors is more than a mere byproduct of misguided yet color-blind cronyism. Rather, they indicate that racial discrimination is a critical factor underlying the gross statistical disparities presented in the 2004 study.”
The panel reversed the district court’s judgment upholding the constitutionality of the statute as it applies to female, Asian American and Hispanic American subcontractors, however. The state failed to present sufficient evidence that “women subcontractors successfully bidding on state contracts faced private-sector discrimination,” Motz wrote.