Federal law mandates that the government allocate 23 percent of its contracting work to small businesses. A disparity study is a comprehensive effort that analyzes a wealth of data pertaining to the legal, legislative, and contracting environment facing MBEs in a particular jurisdiction or when procuring contracts from a specific federal, state or municipal agency. Or something like that. A contract is legally enforceable because it meets the requirements and approval of the law. Yet, in other instances, discriminatory attitudes of agency personnel and non-MBE primes facilitated excluding MBEs from informal networks that influence learning about and obtaining public contracting opportunities. In certain cases, disparity study consultants also included Native Americans and Subcontinent Asian Americans, but these instances were relatively few or often contained inadequate data to compute a disparity ratio. 78.2 percent of all disparity ratios drawn from the set of disparity studies were less than 0.8, with a median value of 0.19. In response to the legal precedent,2 government agencies have commissioned disparity studies to examine the extent to which minority contractors are underutilized in public procurement in a particular industry and geography, such that the agency can determine whether a legally-defensible race-conscious program is justified or needed to provide remedial relief given discriminatory or exclusionary behavior. Lastly, many studies provided hundreds of different additional disparity ratios based on smaller geographic regions, combining across industries, looking at different funding sources, or looking at different time periods. 7 This does not represent the totality of disparity ratios reported in the 100 studies. Test Your Knowledge - and learn some interesting things along the way. Furthermore, many studies tested whether these disparity ratios were statistically significant, where disparity study authors used statistical approaches to test whether the disparity could have arisen due to chance, or some other factor such as discrimination. What information do existing studies provide stakeholders in assisting agencies address observed disparities? In order to determine the extent to which disparities exist among MBEs and different racial and ethnic groups, disparity studies compute numerical disparity ratios using agency procurement data, information on winning bidders, and a comprehensive analysis of actual and potential bidders to determine which firms are ready, willing, and able to bid on contracts. Critics of the validity of anecdotal evidence argue that the accounts may not be sufficiently verified and that instead of detailing actual accounts of discrimination, the evidence may only present perceptions of discrimination. The barriers identified varied from outright prejudicial treatment and instances of exclusion based on racism, to marketplace barriers erected by systemic discrimination in both the private and public market (e.g., access to capital). 1 This report uses the terms “affirmative action programs,” “race-based programs,” and “race-conscious programs” interchangeably, where the terms imply a government initiated program that specifically includes racial or ethnic preferences in alleviating discriminatory behavior. Accessed 11 Oct. 2020. Arguably the most difficult barrier to address with respect to discrimination is the exclusionary networks that MBEs encountered in public contracting. Croson Co. (488 US 469 (1989)) and Adarand Constructors Inc. v. Peña (515 US 200 (1995)) are two seminal legal decisions that established the evidentiary tests necessary to evaluate local, state, and federal race-conscious contracting programs. Disparity studies often reported the same race-neutral remedies (e.g., unbundling large contracts, improving payment processes, improving data collection) and race-conscious remedies (e.g., improved goal setting and monitoring) to address contracting disparities, yet what is missing is the extent to which agencies have actually implemented and measured the success or failure of these recommendations. Lastly, 99 percent of statistically significant disparities identified by study authors were less than 0.8, > lending strong support for discriminatory behavior in contracting. Discrimination influenced multiple contracting barriers, both from the marketplace, as well as driven by either a contracting agency or non-MBE prime in the context of subcontracting. Anecdotal evidence does not establish the predicate for race-conscious programs, but instead, aids policymakers in evaluating whether a contracting program is needed and narrowly tailored to address demonstrated discriminatory behavior.

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