CIR Battles the Racial Spoils System in Federal Contracting

Paul Patin and Jeff Weinstock are owners of a small business, Dynalantic Corporation, which makes simulation equipment, including flight simulators for aircraft. Simulators are important, especially post-September 11, because the equipment allows U.S. military personnel to practice their skills safely while conserving fuel and minimizing airplane maintenance costs. As one might expect, Dynalantic has sold a lot of equipment to the Department of Defense.

     Most Americans have probably never heard of the federal government’s controversial 8(a) program administered by the Small Business Administration (SBA). Under the program, “socially and economically disadvantaged businesses” are entitled to special treatment in government contracts. Agencies set aside certain procurements for 8(a) participants only. In theory, the program is supposed to make sure that “socially and economically disadvantaged businesses” get a share of the billions of dollars that the federal government pays for goods and services each year.

     Paul and Jeff could only scratch their heads at the idea of a “disadvantaged” business. No evidence exists that their industry has any history of discrimination. So they were just stunned when they learned that they could not bid on a contract for helicopter simulators because the contract was reserved for “minority contractors” only. Under the law, an 8(a) qualifi ed fi rm must be predominantly owned and controlled by a “socially disadvantaged person.” African-Americans and Hispanic Americans, among many others, are presumed to fall into this category.

     Paul and Jeff turned to CIR because, even with a clearcut victory in court, their case would not be lucrative enough to interest a commercial law firm over the long term. Paul and Jeff just want to do business. It would be difficult to obtain damages under the law; all they are seeking is forward-looking relief. CIR, of course, is very interested in the case (Dynalantic Corp. v. U.S. Dept. of Defense, Small Business Administration, and Dept. of the Navy) because of the principle involved.

     One would expect that those in government responsible for federal procurement and contracting (especially in the fi eld of national defense) would be primarily concerned with the efficient use of government funds. Unfortunately, CIR’s research for this case shows that the facts are otherwise. Behind a facade of race-neutrality, the SBA program conceals illegal racial preferences that siphon millions of taxpayer dollars to supposedly “disadvantaged” business owners, some of whom have net worths of millions of dollars.

     During the Clinton era, even more time and money was wasted on Commerce Department “studies” which attempted to track “disparities” in the number of contracts which go to “small disadvantaged businesses.” Of course, the American economy is pretty big and complex, so even the federal government with resources to waste on this kind of research had trouble keeping track of everything American inventiveness creates. It so happens that the government never actually got around to studying the simulation industry. Paul and Jeff were arbitrarily excluded from bidding on a contract—because of their race.

     CIR expects to win this case. In Adarand Constructors, Inc. v. Pena (1995), the Supreme Court extended “strict scrutiny” to federal procurement. This means that the federal government cannot use racial quotas except as a “narrowly tailored” remedy for past discrimination. The principle is clear—but misguided people will still try to justify racial and ethnic discrimination in federal government contracting. After all, money is at stake. And some people (mainly law school professors) have an ideological stake in perpetuating race and victim consciousness. As of this writing, the Dynalantic case is pending in U.S. District Court for the District of Columbia. Stay tuned.