Ruling could end some set-aside programs

Government and industry officials are unsure what will happen now that a federal appeals court has ruled against some Defense Department minority contracting programs.The  court ruled Nov. 5 that Congress had not proven DOD was discriminating against small businesses owned by minorities and therefore could not justify requiring preferential treatment through contract set-asides. Because the law incorporates an explicit racial classification, it is subject to strict court scrutiny, and Congress “must have a strong basis in evidence,” according to the ruling.“The statute fails strict scrutiny,” the court ruled.A DOD spokesman said officials will carefully consider the decision, but it is too soon to know what effect it will have.The primary rationale of the court’s decision could be the impetus for further action against set-asides, said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy and now partner at law firm Venable. The underlying principle could be applied to women-owned small-business contract set-asides, for example.DOD spent $15.5 billion, or 5.75 percent of its contracting dollars, with small, disadvantaged businesses in fiscal 2007.