Set-Asides Ruling Could Shift Playing Field

Legal Aspects, Public Works
No.12, Vol 134; Pg 80

A small surveying firm recently won a challenge to the New Jersey set-asides law in a landmark ruling with national implications.

The U.S. District Court for New Jersey this past summer entered a consent decree which bars the state from enforcing its controversial set-asides program. Aimed at favoring small businesses, as well as woman-owned and minority-owned enterprises in the awarding of public contracts, the program violates the Equal Protection Clause of the U.S. Constitution, the court said.

The court’s July 11 ruling centered on a case filed in June 2001, GEOD Corp. vs. State of New Jersey, et al. A small, majority-owned surveying and aerial photography firm, GEOD had claimed that it was wrongfully being denied the opportunity to bid upon and obtain state jobs, largely as a subcontractor, because a hefty portion of its work was governed by existing state affirmative action programs which favored MBE and WBE firms.


GEOD had characterized New Jersey’s set-aside program as "reverse discrimination," because it greatly restricted the firm from competing for state contracts solely because the firm is owned by white males. Through the Freedom of Information Act, GEOD President John Emilius had obtained a list of state contracts awarded between 1995 and 2000 by the departments of transportation in both New Jersey and New York. He found that 80% of all subconsultants–which are typically small businesses–on engineering design contracts were MBE/WBE firms. For professional services such as land and aerial surveys, that percentage was even higher, climbing to 95%.


Bolstered by his research, Emilius complained to local and state officials that with mandatory goals on prime contracts set as high as 30%, there is little opportunity left for small businesses owned by white males to provide services as subconsultants. Why? Because typically the prime contractor will subcontract out only the type of work it does not perform in-house, which rarely amounts to more than 30% of project cost. So, usually, all or most subcontracts will go to MBE/WBE firms.

When its arguments tell on deaf cars, GEOD decided to take legal action, claiming it as a necessary act of self-preservation. So, represented by the nonprofit Atlantic Legal Foundation, it filed suit against the State of New Jersey, alleging that its set-aside program violated the constitutional rights of GEOD and its shareholders because it discriminated against them on the basis of race, ethnicity, and gender.

Current law misinterprets the landmark Civil Rights Act of 1964, GEOD argued. Prohibiting discrimination because of a person’s race, color, religion, sex, or national origin, the 1964 Act was a remedy for the deprivations blacks had suffered for generations of slavery and discrimination.

But in state and local set-aside programs over the next several decades, the criteria was widened so that affirmative action was extended to include: Hispanics, Asians, Native Americans, Indians, Pakistanis, and more than 42 other groups, whether they had experienced discrimination or not. In fact, under the Act, roughly two-thirds of the U.S. population can be defined as "disadvantaged."

Participants in these federal programs include the federal government itself, and state governments, and agencies which are receiving federal funds as well as county and city governments and their agencies, as well as the interstate agencies such as the PortAuthority of New York and New Jersey.


The result is that programs supposedly aimed at ensuring equal opportunity for all actually result in discrimination against, and lack of opportunity for, small businesses owned by white males. So, what began as a measure of justice and grace had become itself a source of injustice and envy, the plaintiff contended.

Furthermore, GEOD argued, "The individual constitutional right to equal protection under the law is the foundation upon which our nation was built. Discrimination is wrong, regardless of whether the victim is black, white, male, or female."

New Jersey’s Attorney General conceded, explaining why the state had agreed to the consent decree, "This set-aside program could not survive constitutional scrutiny."

Sharon Glorioso