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San Diego will steer contracts to women, people of color. What will courts say?

San Diego will take the legally risky step of giving preferential treatment to women- and minority-owned businesses when awarding city contracts, a move that appears to be in direct conflict with a voter-approved state proposition that sought to ban affirmative action.

Despite advice from City Attorney Mara Elliott warning against creating such programs, the City Council voted 9-0 this week to establish legally defensible policies that aim to help businesses owned by women and people of color get their fair share of billions of dollars that San Diego awards in city contracts.

Councilmembers said they are aware of the legal risk, and of the failures of other cities like San Jose to successfully create preferences that aren’t struck down by courts for violating Proposition 209, the measure outlawing such preferences that state voters approved in 1996.

But councilmembers said aggressive action is needed to make San Diego a more equitable city, despite the potential legal risks.

Their move is being fueled by a disparity study released last summer that showed businesses owned by women and minorities — particularly Black people and Native Americans — don’t get their fair share of city contracts.

Businesses owned by White women and people of color received only 19 percent of $2.2 billion in city contracts awarded during a five-year period analyzed in the study, compared to the 31 percent the study says they should have landed.

“I don’t think you can look at the data, see the disparities and not think there was intent there — unless you think there was something wrong with the folks who were left behind,” Council President Sean Elo-Rivera said.

Establishing intent will be key to San Diego’s efforts, because Elliott has said preferences can only be legal under Proposition 209 if there is a compelling government interest to them, such as reversing clear evidence of intentional discrimination.

City staff and the authors of the disparity study say there is no evidence that San Diego’s inequitable awarding of contracts is the result of intentional discrimination, but council members disagree.

Councilmember Raul Campillo said many courts have ruled that substantial disparities are evidence of discrimination.

“We have to ask ourselves, ‘How can the data be so skewed?’” he said.

Campillo said the spirit of Proposition 209 is an equal playing field for contracts, but the city’s track record shows the playing field has been unequal.

“A reasonable inference, and in my mind the only reasonable inference, is that Proposition 209 is being violated as we speak,” he said, contending the city is obligated to change a process that has hurt women and people of color. “I think we all know we need to take this further.”

Councilmember Monica Montgomery Steppe, who has spearheaded the effort to establish preferences in partnership with Campillo, said San Diego must take the legal risk.

“The evidence is here,” she said. “I believe we owe it to the people to fight for what I believe is right.”

Proposition 209 outlaws gender or racial preferences in government contracting, but Elliott says such preferences could potentially be OK if they are narrowly tailored and serve a compelling government interest.

In a legal memo issued last summer, she cautioned against creating contracting preferences because the San Diego disparity study didn’t find evidence that “intentional discrimination” played a role in the city’s inequitable outcomes.

“Although the study revealed disparities in some categories of contracting, there is no evidence of intentional discrimination that would permit the establishment of a program that targets persons with protected characteristics, such as race or gender,” Elliott wrote.

When cities have tried to create preferential programs that meet Proposition 209’s strict requirements, their efforts have failed in court. For example, in 2000, the state Supreme Court ruled against a San Jose law requiring “participation goals” and “targeted outreach.”

In conjunction with voting to create preferences, the council approved more than a dozen new contracting policies Tuesday that do not explicitly address gender and race but still aim to help women- and minority-owned contractors.

They include dividing large contracts up so that smaller companies have the capacity to fulfill them, reducing bonding requirements some businesses can’t afford and improving outreach to businesses owned by women and minorities.



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