US minority contracting, a world of discrimination and fraud

US minority contracting, a world of discrimination and fraud. By David Bernstein.

When writing my book Classified: The Untold Story of Racial Classification in America, three things struck me about MBE [minority business enterprise] affirmative action.

Administrative state wins against Supreme Court:

One is that the Supreme Court issued two pretty strict rulings against in in 1989 and 1994, everyone thought this would be the end of minority contracting quotas and preferences. As it turned out, government at all levels was so committed to these programs that they exploited loopholes in the decisions and took advantage of the limited resources of preference opponents, such that racial preferences in contracting are more prevalent than ever. Which shows, in turn, that if SCOTUS want to get rid of such programs, whether in education or contracting, they need to hold them unconstitutional, period.

Descendants of slaves don’t get the benefits:

The second is that these programs were instituted in the 1970s to help black Americans integrate into the national economy, but the vast majority of such contracts go to post-1965 Hispanic, Caribbean, African, and Asian immigrants and their descendants, and to people with distant Native American heritage. Very few MBE contracts to descendants of American slaves.

I tried to get some hard data on this from friends in the Trump federal Department of Transportation, but word came back that the statistics were so embarrassing that no one would ever release them.

Meanwhile, given immigration and intermarriage rates, within a few decades eighty percent or more of Americans will be eligible for an MBE preference. If almost everyone gets a preference, does it still count as affirmative action?

Fraud is rampant, because the bureaucrats don’t care enough:

Third, not only can people with only vague, distant minority ancestry claim MBE status, there is an incredible amount of fraud in these programs. Paper-only majority ownership by minorities, with the real owners being white men. White men pretending to be American Indians (finally, in 2019 the DOT started requiring tribal membership instead of self-identification), white men buying membership in Indian tribes, white men inventing otherwise non-existent Indian tribes and getting state legislatures to recognize the new tribe … and so on.

Blank Reg comments:

I used to work with a guy who quit to become a “minority contractor.” The way it works is the city sets aside a certain percentage of their capital budget (I believe it was 35%, maybe higher now). So if they have a job, say painting the inside of one of their buildings, he’ll find out what the lowest bid was, then put in one for about 10 percent more.

He, as a minority, gets the contract, but he doesn’t know anything about painting. Also, he’s never done manual labor in his life, and he’s not about to mess up his suits trying. So he then goes and hires the original low bidder at the price he bid and pockets the difference.

Basically his only job was being a professional black man. The city gets their job done by a real pro, the contractor gets paid what they expected to, and my friend gets a nice payday for basically doing nothing.

Judge Glock adds that this mess is a major reason government in the US is so inefficient and pricey:

Nearly 10 percent of the U.S. economy goes through government contracts. The federal government spends over $600 billion yearly on contracts, making it the largest buyer of goods and services on the planet. State- and local-government spending on contracts totals about $1.3 trillion annually. …

Minority residents of urban areas pay the highest price for lackluster and expensive services caused by such programs.

One underappreciated reason for the unparalleled costs of American urban and infrastructure projects is that the government too often picks contractors based on their sex or race, not the quality or cost of their bids. …

[A] study, focusing on federal set-aside requirements for disadvantaged firms, found that they increased average expenditure overruns by 35 percent and delays by 6.4 percent, relative to normal government bidding. The set-asides also raised the number of costly renegotiations after contracts were issued. These costs, delays, and failures impose substantial burdens on taxpayers and impede the core functions of government. …

If governments want to argue that their present discrimination is justified by past discrimination, they hire highly paid researchers to lay out a litany of their sins. A handful of firms — usually themselves run by racial minorities or women — write these studies, and it’s lucrative work. One estimate pegs the cost at around $500,000 apiece, though large portions of the studies tend to be copied from previous reports. In 2006, one researcher observed that despite these disparity studies’ glaring flaws, they were “perhaps the largest government expenditure for social science research ever.”


The most common kind of MWBE fraud is simple: contractors with subpar bids either lie about being run by minorities or lie about involving other minority businesses in the contract. … These cases tend to follow a certain playbook. A minority-owned front company wins the government contract, takes a small cut, and issues a pass-through contract to a white-owned firm. …

Like all racist policies, minority contracting requires a method to officially determine race:

Tens of billions of dollars are at stake in minority contracts, which means that the government must figure out ways to divine contractors’ race. Doing so isn’t easy because government definitions of race are inevitably unscientific. According to one estimate, more than 300 public and private organizations certify minority and disadvantaged statuses for businesses — usually for a fee that, naturally, must be repaid every few years. …

Lefties — yeah!

Modern progressive racialism has supercharged previous minority-contracting initiatives. As part of President Joe Biden’s proposal to “Build Black Wealth and Narrow the Racial Wealth Gap,” his administration pledges to increase federal contracting to disadvantaged businesses by 50 percent a year, or 15 percent of all contracts. …

The next front in the minority-contracting struggle is giving lesbian, gay, bisexual, and transgender people special access to contracts. There is scant evidence that the government has ever considered the sexual proclivities of, and therefore discriminated against, the owners of bus services or wire-repair companies. That hasn’t stopped the flood of special contracts. The National LGBT Chamber of Commerce has its own certification program, costing $400 per application, to demonstrate that business owners are LGBT.

This is, admittedly, tough to prove: the chamber gives business owners several options, including providing three “letters of reference” to attest to an owner’s sexual identity. One of the chamber’s representatives must then conduct a “site visit” of the business. It must be hard to determine if the owners are acting too heterosexual to qualify. …

California already has a “voluntary” 1.5 percent LGBT procurement goal for private utilities, which must submit plans on how they will try to contract with, say, excavating companies owned by bisexuals.

Colorblind was so much easier, moral, honest, and more efficient. But too many people now have a stake in a racial spoils system.