The white owners of two small businesses based in Houston, Texas, are suing to block government policies privileging minority-owned businesses in city contracts. The policies also privilege women-owned businesses. However, the Pacific Legal Foundation (PLF), which represents the businesses, told Legal Insurrection it “made a strategic decision to focus directly on the race-based set-asides.”
Jerry and Theresa Thompson own Landscape Consultants of Texas and Metropolitan Landscape Management. Their companies compete for city landscaping contracts. However, because of the Thompsons’ race, their companies “cannot compete on equal footing with other businesses.”
Landscape Consultants, for example, has a $1.3 million contract with the city with an 11 percent set aside for minority-owned businesses.
This means that Landscape Consultants must take at least $143,000 of work away from its (largely minority) staff, even though they are capable of doing the work, and pay a competitor to do the work—solely because of the race of Landscape Consultants’ owner and the race of its competitor’s owner.
Midtown Management District (MDD), a local government entity, uses a racial set-aside program that takes a different approach. MDD’s program allocates “bonus points to bids” from minority-owned businesses submitting bids for MDD contracts.
MDD evaluates bids across four categories. Of the 100 points possible, MDD automatically awards 10 points to a minority-owned business:
Financial considerations – 50 pointsOrganizational Qualifications and References – 25 pointsProposed Approach – 15 pointsMinority, Women, Disadvantaged Enterprise (MWDBE) – 10 points
In 2022, Metropolitan Landscape submitted a bid for an MDD contract. MDD awarded Metropolitan Landscape 84.96 points across the three criteria for which it qualified, but Metropolitan Landscape lost the bid by 2.7 points because it received 0 points in the MWDBE category, according to the complaint.
A minority-owned business competed for the same MDD contract and, according to the complaint, received 87.68 points, including 10 points in the MWDBE category, securing the contract for that business.
If not for the 10 MWDBE points that were awarded to the successful bidder and not awarded to Metropolitan [Landscape] on the basis of the owner’s race, Metropolitan [Landscape] would have scored higher than all other bidders and secured the $350,000 contract.
The city justifies its program as a remedial measure, pointing to “strong statistical and anecdotal evidence of discrimination” against minorities in the city contracting process. PLF disputes this claim:
[T]the city has relied on so-called “disparity studies” (which purport to measure the rate at which women and various racial groups are under- or over-represented among the companies who contract with the city) to justify the need for racial and sex-based set-asides.
According to the complaint, the city has not published the results of a disparity study since 2006. However, “[t]he City contracted for but never released a 2016 comprehensive disparity study.”
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