Legal Issues: State Set-Aside Programs Under Scrutiny By Antonio R. Franco, Esq. Since the Supreme Court’s Adarand decision, the federal and state governments have revamped their set-aside programs to ensure that they survive strict scrutiny by the courts. Despite the changes these programs have undergone, opponents of set-asides have continued targeting them, particularly the Department of Transportation’s Disadvantaged Business Enterprise program, as implemented through state Minority Business Enterprise programs. Recently the state of Alaska, prompted by a decision of the Ninth Circuit Court of Appeals, decided to examine whether to replace race-based measures with race-neutral measures for the State’s DBE program. The Ninth Circuit Court’s decision and Alaska’s efforts offer important lessons to supporters of set asides on the information that needs to be gathered for states to maintain set asides. In Western States Paving Company vs. Washington State Department of Transportation, the Ninth Circuit Court of Appeals, one of the more liberal circuit courts in the country, held that Washington state’s DBE program was not narrowly tailored because the evidence of discrimination supporting the program was inadequate. According to the Ninth Circuit, the state’s evidence of discrimination was insufficient because, among other things: (1) Washington state had not conducted statistical studies to establish the existence of discrimination in highway contracting and the highway contracting industry; (2) the state’s calculation of the capacity of DBEs to do work was flawed because it failed to take into account the effects of past race consciousness on current DBE participation; (3) the disparity between DBE participation on contracts with or without affirmative action components did not provide any evidence of discrimination; (4) the state did not present any anecdotal evidence of discrimination; and (5) the affidavits required of DBEs certifying that they are socially and economically disadvantaged should not be deemed evidence of present discrimination. The Court’s findings not only impacted Washington state but also the states within the jurisdiction of the Ninth Circuit. Following the decision, Alaska’s Department of Transportation decided to reexamine whether race-neutral criteria should be established for Alaska’s DBE program. Alaska DOT scheduled meetings and sought the public’s participation in the fact-finding process. Alaska DOT urged interested parties to participate in the meetings and/or submit written comments on the state’s program. In a questionnaire the public was asked to comment on, among other things, how DBEs have been or currently are being discriminated against in federal DOT contracting and whether DBEs should continue to have the same, less or more opportunities for participation as subcontractors. The information Alaska DOT gathers from participants will be used in deciding whether to maintain race-based programs or develop race-neutral criteria. Needless to say, if the data Alaska DOT gathers is not strong enough to support maintenance of the race-based programs, Alaska DOT may have to change its program to satisfy the Ninth Circuit Court’s strict scrutiny. Given the ongoing challenges set-aside programs are likely to face at the state and federal level, supporters of these programs need to be aware of the efforts the states are making to gather sufficient evidence to support race-based programs. Supporters of set asides must gather sufficient evidence of discrimination and its effects on state contracting to support continuation of their programs. Even when discrimination is present, the states must establish a narrowly tailored program that is limited to those specific groups that have actually suffered discrimination or its effects. If the states do not have the evidence to support the set-aside programs that currently exist, they may be replaced by race-neutral programs that are open to all contractors. Participation in the evidence-gathering efforts of the different states can make a difference on whether these programs have any long-term viability. (Antonio Franco’s practice includes all aspects of federal government contracting, including bid protests, contract claims and contract administration.)