Affirmative Action in Government Procurement and Contracting
This paper examines affirmative action programs in government procurement and contracting, with particular emphasis on the highway and construction industries. It explores how federal and state policies have required agencies to set contract goals for minority- and women-owned businesses, tracing developments from the 1970s through recent court rulings that restricted race-conscious programs. Drawing on research by Marion, Blanchflower and Wainwright, Fairlie and Marion, and others, the paper evaluates the effectiveness of Disadvantaged Business Enterprise (DBE) goals, the consequences of program termination, and the structural barriers minority-owned firms continue to face. It concludes that affirmative action meaningfully increases contract awards to disadvantaged businesses, though set-aside programs do not always deliver proportional funding shares.
- Introduction to Affirmative Action in Procurement: Defines procurement-based affirmative action and policy context
- Affirmative Action in the Highway and Construction Industry: Scope of affirmative action in construction contracting
- Federal Mandates and Program Structure: 1982 DOT mandate and ten-percent DBE contract goals
- Effectiveness of DBE Programs and Research Evidence: Empirical studies on DBE utilization and program outcomes
- Barriers Facing Minority-Owned Businesses: Discrimination, capital access, and structural disadvantages
- Long-Term Impacts and Changing Policy Landscape: Court rulings and shifting rules for minority contractors
- Conclusion: Summary of affirmative action effects on DBE contracting
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What makes this paper effective
- Grounds policy analysis in concrete statistics — for example, citing the $14.6 billion in construction contracts awarded via federal funds and the $2 billion subset reaching minority- and women-owned firms — making abstract program debates tangible.
- Balances multiple research sources (Marion, Blanchflower and Wainwright, Fairlie and Marion, Lovaton Davila and Myers) to build a nuanced picture rather than relying on a single study.
- Tracks policy chronologically, showing how federal mandates evolved from 1982 minority requirements through the 1988 extension to women-owned businesses and subsequent court-driven rollbacks.
Key academic technique demonstrated
The paper demonstrates systematic synthesis of empirical literature: it presents competing findings — studies showing affirmative action boosts DBE utilization alongside studies showing post-termination effects were minimal for self-employment rates — and reconciles them without ignoring contradictions. This honest handling of mixed evidence is a hallmark of rigorous policy analysis writing.
Structure breakdown
The paper opens with a broad definitional introduction to procurement-based affirmative action, then narrows to the highway and construction sector where the policy is most extensively applied. Subsequent sections move through federal mandate history, program effectiveness evidence, structural barriers, and evolving court decisions, before a conclusion that synthesizes key findings. This funnel structure — broad context to specific industry to evidence to implications — is well-suited to policy research papers at the undergraduate level.
Introduction to Affirmative Action in Procurement
Affirmative action programs in procurement are among the more significant government initiatives proposed to improve self-employment prospects for minorities and women. In essence, affirmative action policy with regard to procurement or contracting requires that business concerns owned by women or minorities have the greatest opportunity to participate as suppliers of goods and services. This also applies to construction, regardless of whether work is purchased through a grant, contract, or organizational funds. According to Marion (2011), statistics indicate that in 2002, approximately 7% of federal procurement funds were awarded to underprivileged enterprises and initiatives through the Small Business Administration (SBA). It is also a common feature for numerous national and local government agencies to offer preferential treatment to minority-owned organizations (Marion, 2011).
In recent years, court decisions and various measures undertaken by the states have reduced the scope of — and in some settings eliminated — affirmative action programs based on sex and race. This in turn has renewed the importance of understanding the role that affirmative action plays in the success of women and minorities who own businesses and are self-employed (Marion, 2011).
Affirmative Action in the Highway and Construction Industry
The application of affirmative action is most prevalent in the construction and highway procurement industries. From the 1970s and 1980s onward, the majority of states in the United States have used affirmative action to award contracts to minority-owned companies. From 1982, the Federal Highway Administration also obligated states to apply affirmative action when awarding projects financed with federal funds. For instance, near the turn of the century, statistics indicate that states awarded approximately $14.6 billion in total construction and repair contracts through federal funds. Of that figure, roughly $2 billion was awarded to companies owned by women and minorities.
In more recent years, states have gained greater latitude to employ race-neutral measures in meeting their participation objectives. This shift has had a disparate impact on the utilization of minority-owned businesses. Understanding the effects of affirmative action in highway procurement is made especially important by the public sector's dominant role in the industry. In the two most recent industry censuses, nearly 75% of revenue generated by companies operating in the highway and street construction sector came from government-owned projects. Consequently, changes in public procurement policy carry significant implications for companies operating in the highway and construction industries (Blanchflower and Wainwright, 2005).
Federal Mandates and Program Structure
Beginning in 1982, the United States Department of Transportation mandated that states implement affirmative action programs for minorities in the awarding of federally aided road and highway construction contracts. Specifically, states were required to award at least ten percent of the total value of such contracts to small businesses owned and operated by minority groups. States were, however, permitted to petition for and establish a minority participation goal below the ten percent threshold. Six years later, these affirmative action programs were extended to include women-owned business enterprises, allowing states to satisfy the ten percent requirement by awarding contract funds to women-owned companies in addition to minority-owned business enterprises (MBEs).
The effectiveness of affirmative action in public highway construction is a significant policy question that has received insufficient attention. During the mature years of the affirmative action program, more aggressively applied affirmative action at the state level substantially increased purchases from minority-owned businesses. However, this had very little impact on procurement from women-owned businesses (Holzer and Neumark, 2000). By raising the Disadvantaged Business Enterprise (DBE) goal, there is greater effectiveness in increasing DBE utilization across states with stronger enforcement administrations and when the raised goal is likely to be binding.
During the early periods of the affirmative action program, states frequently adjusted their goals — most likely due to initial calibration of program parameters to make them more suitable for state-specific circumstances. According to Marion (2011), several notable outcomes resulted from this process. States with stronger enforcement administrations tended to have a lower DBE utilization-to-goal slope, and adjusting the state goal had a greater effect during periods when states were either easily meeting or substantially missing their DBE goal.
Conclusion
There is a wide prevalence of affirmative action programs designed to increase the utilization of women- and minority-owned companies in public procurement. This paper has examined how effective these programs are in the construction of roads — an extensive public procurement market that makes widespread use of affirmative action. One notable finding is that affirmative action also varies across individual projects within a given state. Research consistently indicates that affirmative action substantially increases the contracts and grants awarded to these companies. This is attributable to the fact that raising the Disadvantaged Business Enterprise (DBE) goal increases DBE utilization across the state as a whole. At the same time, research indicates that even when women- and minority-owned companies nominally benefit from contract set-asides, they do not always receive a proportional share of total contract funds — resulting in a reduced fraction of total procurement spending flowing to Disadvantaged Business Enterprises (Lovaton Davila and Myers, 2012).
According to Marion (2011), raising the affirmative action goal on a given project increases the proportion of the contract subcontracted to Disadvantaged Business Enterprises. In states such as California, highway construction companies owned by minorities, including Asian Americans and African Americans, continue to face evidence of racial bias. Research has shown that affirmative action policies play a significant role in the survival rates of minority-owned companies, and that their termination carries measurable adverse consequences for both procurement outcomes and broader employment opportunities within these communities.
References
Bates, T., & Williams, D. (1996). Preferential procurement programs and minority-owned businesses. Journal of Urban Affairs, 17(1), 1–17.
Blanchflower, D. G., & Wainwright, J. (2005). An analysis of the impact of affirmative action programs on self-employment in the construction industry (NBER Working Paper No. w11793). National Bureau of Economic Research.
Chay, K., & Fairlie, R. (1998). Minority business set-asides and Black self-employment. Mimeo, University of California, Berkeley.
Fairlie, R., & Marion, J. (2012). Affirmative action programs and business ownership among minorities and women. Small Business Economics, 39(2), 319–339.
Holzer, H., & Neumark, D. (2000). Assessing affirmative action. Journal of Economic Literature, 38(3), 483–568.
Lovaton Davila, R., Ha, I. S., & Myers, S. L., Jr. (2012). Affirmative action retrenchment in public procurement and contracting. Applied Economics Letters, 19(18), 1857–1860.
Marion, J. (2011). Affirmative action and the utilization of minority and women-owned businesses in highway procurement. Economic Inquiry, 49(3), 899–915.
Myers, S. L., & Chan, T. (1996). Who benefits from minority business set-asides? The case of New Jersey. Journal of Policy Analysis and Management, 15(2), 202–226.
Taylor, R. L. (2011). Affirmative action and governmental procurement policies: The rules of the game have changed. Journal of Applied Business Research, 6(4), 28–34.
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