2024 Report: Federal Contracting Disparities Not Improving

In our inaugural posts, we located the advent of DEI history with the 1961 Executive Order 10925, issued during the early months of the Kennedy administration, that called for affirmative action, affirmative steps, and affirmative cooperation in order to achieve nondiscrimination on the basis of “race, creed, color, or national origin” in matters of federal employment and contracting.

Vice President Lyndon Baines Johnson was appointed chair of the President’s Committee on Equal Employment Opportunity (PCEEO), and he would continue to call for affirmative action by contractors and affirmative cooperation by labor unions in his own 1965 Executive Order 11246.

In this post we take a snap shot of how things looked on Dec. 20, 2024, when the White House Council of Economic Advisers (CEA) documented “racial gaps in contracting dollars,” and provided “new evidence that discrimination likely plays a role.” Here are the key findings of that CEA research:

1. Racial disparities in contracting dollars exist with minority-owned firms receiving a smaller share of contracting dollars than their representation among available firms.
2. Representation gaps are not restricted to any one ethnic group, as significant gaps exist between white-owned firms and Black, Hispanic, Asian and Native American owned firms.
3. Disparities have not improved significantly since the 1990s and were larger in the years leading up until 2019 than any period covered in the data.
4. Disparities are much more pronounced in terms of contracting dollars as opposed to being a contractor at all. This is due to minority firms being much less likely to be the prime contractor and generally receiving smaller contracts than non-minority owned firms.
5. Disparities by race are larger in geographic locations with more measured racial bias (based on accepted measures of racial bias used in social science) – suggesting that racial discrimination may play a role.
6. The relationship between racial bias and racial gaps in contracting persists even when accounting for observable measures of available minority businesses (such as the minority share of the population, the educational level of the minority population in the area, and the number of available minority-owned firms).
7. Disparities only exist (in a statistically significant way) in areas with moderate and high levels of bias, and statistical models show that if all places were like those with the least racial bias, the overall racial disparities in contracting could largely be eliminated.
8. Disparities are much smaller when disadvantaged business enterprise (DBE) goals are in place regarding the participation of small business owned and controlled by socially and economically disadvantaged individuals.
9. Racial bias is largely unrelated to racial disparities in contracting disparities when DBE goals are in place, and the presence of DBE goals mitigates minority underrepresentation associated with bias. Further evidence that racial discrimination plays a role in existing gaps, and that these can be mitigated with DBE goals.

To sum up: (a) racial disparities in federal contracting were not improving and had even suffered a recent period of setback, (b) evidence points to the cultural influence of background racism, and yet, (c) outcomes do improve where clear goals are set.

Our conclusion: setting (Disadvantaged Business Enterprise) DBE goals is an activity that would satisfy the meaning of affirmative action, affirmative steps, or affirmative cooperation.

Meanwhile the US Department of Transportation has recently asked a federal court to hold that its DBE program is unconstitutional.