Federal agencies will soon start using new rules for giving contracting preferences to minority-owned businesses, under guidance published in the Federal Register last week.
The guidance follows President Clinton's June 24 announcement of the rules, which are meant to balance the administration's support of affirmative action programs with a 1995 Supreme Court decision limiting minority preferences in federal programs.
Under the new rules, the Commerce Department will develop an annual list of industries in which small minority-owned companies have a smaller percentage of the federal market than the minority businesses have in the entire U.S. market. Only companies in industries that make the list will qualify for special consideration when agencies award contracts.
For example, if minority-owned widget makers took home 3 percent of federal widget business but 8 percent of the U.S. widget market, then widget makers would qualify for preferences in federal procurement. Qualifying firms can bid up to 10 percent higher than the lowest non-minority-owned business and still be considered the lowest bidder.
In two powerhouses in federal contracting--the computer equipment industry and major portions of the construction industry--minority-owned businesses will not be able to claim a preference under the new standards.
A new rule also gives prime contractors extra credit in contracting decisions if they use small disadvantaged businesses as subcontractors. But the subcontractors must be in industries that make the Commerce Department list.
The changes to federal procurement rules follow the 1995 Supreme Court decision in Adarand Constructors Inc. v. Pena. In that decision, the court ruled that a "strict scrutiny" standard must be applied to any federal program giving preferences to minorities. To make its point, the court used the word "scrutiny" 89 times in its opinion, according to Public Administration Review.
The federal government--particularly the Justice, Commerce and Defense departments, the General Services Administration and the White House--have spent the last three years figuring out how to translate the court's ruling into procurement policy.
The rules take effect Jan. 1, 1999. They were published in the Federal Register on June 30 and July 1.
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