RI Chapter, Assoc. Gen. Contractors v. Kreps

• Decision Date: 06 February 1978
• Docket Number: Civ. A. No. 77-0676.
• Citation: 450 F. Supp. 338
• Parties: RHODE ISLAND CHAPTER, ASSOCIATED GENERAL CONTRACTORS OF AMERICA, INC., Plaintiff, v. Juanita KREPS, in her capacity as Secretary of Commerce of the United States, the City of Pawtucket, the City of Warwick, the City of Newport, the City of East Providence, the City of Cranston, the City of Woonsocket, the Town of North Kingstown, the Town of Coventry, the Town of Johnston, the Town of North Providence, and the Pawtucket Redevelopment Agency, Defendants.
• Court: U.S. District Court — District of Rhode Island

450 F. Supp. 338

RHODE ISLAND CHAPTER, ASSOCIATED GENERAL CONTRACTORS OF AMERICA, INC., Plaintiff, v. Juanita KREPS, in her capacity as Secretary of Commerce of the United States, the City of Pawtucket, the City of Warwick, the City of Newport, the City of East Providence, the City of Cranston, the City of Woonsocket, the Town of North Kingstown, the Town of Coventry, the Town of Johnston, the Town of North Providence, and the Pawtucket Redevelopment Agency, Defendants.

Civ. A. No. 77-0676.

United States District Court, D. Rhode Island.

February 6, 1978.

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Peter Lawson Kennedy, Providence, R. I., for plaintiff.

Everett C. Sammartino, Asst. U. S. Atty., Providence, R. I., for Juanita Kreps.

Moses Kando, City Sol., Pawtucket, R. I., for City of Pawtucket.

William J. Toohey, City Sol., Warwick, R. I., for City of Warwick.

James S. O'Brien, Frederick W. Faerber, Jr., Newport, R. I., for City of Newport.

Orlando A. Andreoni, Providence, R. I., Nathaniel J. Rendine, East Providence, R. I., for City of East Providence.

John F. Sherlock, Jr., Maryfrances McGinn, Providence, R. I., for Pawtucket Redevelopment Agency.

Girard Visconti, Providence, R. I., for R. I. Subcontractors.

Jeremiah S. Jeremiah, Jr., City Sol., Cranston, R. I., for City of Cranston.

Gerald M. Brenner, Asst. City Sol., Woonsocket, R. I., for City of Woonsocket.

Bernard F. McSally, Providence, R. I., for Town of North Kingstown.

Frank J. Williams, Providence, R. I., for Town of Coventry.

William H. Corrente, Asst. Town Sol., Johnston, R. I., for Town of Johnston.

Robert D. Ciresi, Town Sol., North Providence, R. I., for Town of North Providence.

OPINION

PETTINE, Chief Judge.

Plaintiff, the Rhode Island Chapter, Associated General Contractors of America, Inc., challenges whether Congress can, consistent with the Fifth Amendment, pinpoint a percentage of government public works contracts for minority businesses, upon a finding that such businesses do not successfully compete because of past and present discrimination.

Congress authorized the Secretary of Commerce to make grants to state and local governmental entities for use in public works projects in the Local Public Works Capital Development and Investment Act of 1976, 42 U.S.C. §§ 6701-10 (1976) which is Title I of the Public Works Employment Act of 1976, Pub.L. 94-369, 90 Stat. 999 (July 22, 1976). Congress required the Secretary, in allocating grants, to take into consideration the duration and severity of unemployment and underemployment in the localities to be funded, particularly the degree of unemployment in the construction and construction-related industries, and the extent to which proposed public works projects would reduce that unemployment, 42 U.S.C. §§ 6706, 6707.

Congress so acted to "alleviate the problem of national unemployment and . . to stimulate the national economy," H.R. Rep. 94-1077, 94th Cong., 2d Sess. reprinted in (1976) U.S.Code Cong. & Admin.News 1746, 1747, after finding that

For the past two-and-a-half years, the United States has experienced its most severe recession since the Great Depression of the 1930's. . . . (T)he 1974-1975 recession has left an aftermath of high unemployment which will remain high throughout the remainder of this decade. . . .

The construction industry has been a major victim of the current recession. Id. at 1746.

In 1977, Congress increased the original appropriation of two billion dollars for this Act to six billion through December, 1978. Act of May 13, 1977, Pub.L. 95-29, Title I, Ch. III, 91 Stat. 122.

Congress also imposed new conditions upon the making of these grants in the Public Works Employment Act of 1977, Pub.L. 95-28, Title I, 91 Stat. 116 (May 13, 1977), which amended the earlier Act. Congress required that state and local governments award construction contracts to private businesses

. . . by competitive bidding, unless the Secretary shall affirmatively find that, under the circumstances relating to such project, some other method is in the public interest. Contracts for the construction of each project shall be awarded only on the basis of the lowest responsive bid submitted by a bidder meeting established criteria of responsibility. . . . 42 U.S.C. § 6705(e)(1) (1977).

Congress further provided, and this is the nub of the present controversy, that ten percent of the amount of each grant must go to minority businesses:

Except to the extent that the Secretary determines otherwise, no grant shall be made under this chapter for any local public works project unless the applicant gives satisfactory assurance to the Secretary that at least 10 per centum of the amount of each grant shall be expended for minority business enterprises. For purposes of this paragraph, the term "minority business enterprise" means a business at least 50 per centum of which is owned by minority group members or, in case of a publicly owned business, at least 51 per centum of the stock of which is owned by minority group members. For the purposes of the preceding sentence, minority group members are citizens of the United States who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and Aleuts.

42 U.S.C. § 6705(f)(2) (1977).

This minority business enterprise (MBE) provision, introduced by Representative Mitchell of Maryland and amended by Representative Roe, was added to the legislation during the floor debate in the House of Representatives (123 Cong.Rec. H1441, daily ed. Feb. 24, 1977). Brief House and Senate debates¹ furnish the only legislative history. The sponsor, Representative Mitchell, explained the provision in debate, as follows:

. . . All this amendment attempts to do is to provide that those who are in minority businesses get a fair share of the action from this public works legislation.

. . . . .

Let me tell the Members how ridiculous it is not to target for minority enterprises. We spend a great deal of Federal money under the SBA program creating, strengthening and supporting minority businesses and yet when it comes down to giving those minority businesses a piece of the action, the Federal Government is absolutely remiss. . . . The average percentage of minority contracts, of all Government contracts, in any given fiscal year, is 1 percent. . . .

In the present legislation before us it seems to me that we have an excellent opportunity to begin to remedy this situation. . . .

. . . . .

. . . Many States and many local subdivisions have moved into the process of setting aside contracts for minorities. That is because that is the only way we are going to get the minority enterprises into our system.

. . . We cannot continue to hand out survival support programs for the poor in this country. We cannot continue that forever. The only way we can put an end to that kind of a program is through building a viable minority business system. So I am deadly serious about it.

The other objection that will be raised is the objection that everybody else is going to go on a competitive bid basis; why should not the minority enterprise people go on a competitive bid basis? The answer is very simple: we cannot. We are so new on the scene, we are so relatively small that every time we go out for a competitive bid, the larger, older, more established companies are always going to be successful in underbidding us.

Id. at 1436-37.

Pursuant to her authority under the Act, the Secretary of Commerce promulgated regulations on May 27, 1977 which provide:

(b) . . . (1) No grant shall be made under this part for any project unless at least ten percent of the amount of such grant will be expended for contracts with and/or supplies from minority business enterprises. (2) The restriction contained in paragraph 1 of this subsection will not apply to any grant for which the Assistant Secretary makes a determination that the ten percent set-aside cannot be filled by minority businesses located within a reasonable trade area determined in relation to the nature of the services or supplies intended to be procured.

13 C.F.R. 317.19(b) (1977).

According to interpretive guidelines issued by the Department of Commerce, an applicant/grantee, for example a municipality, must assure that the 10 percent requirement for minority businesses will be met. In the alternative, the grantee can apply for a partial or total waiver either before or after initial bidding or subsequent to project approval. Among the factors considered for a waiver are the size of the minority population in the project area, the availability of minority enterprises and the efforts made to enlist minority firms. Guidelines For Round II of the Local Public Works Program, Sec. VIII B.1, at 30-31 (June 6, 1977). Various government agencies will assist grantees and prime contractors to locate qualified minority businesses in the area. Guidelines for 10% Minority Business Participation in LPW Grants, at 4-6, 16 (August, 1977). If noncompliance occurs following project approval, termination of the project may be effected unless both the grantee and the prime contractor are blameless. Id. at 6-7.

The Facts of the Case

Pursuant to this Act and regulations, various Rhode Island Island municipalities applied for and received grants, totalling $17,876,000.00 for twenty public works projects. The City of Pawtucket invited bids and indicated that a responsive bid must agree to commit at least 10 percent of the contract sum to minority businesses, in compliance with the statute. In response, several of plaintiff Association's contractor members submitted bids. One member was awarded the contract as the lowest responsive bidder. However, two other members submitted bids of a lower dollar amount but failed to comply with the 10 percent requirement; their bids were therefore deemed unresponsive.

Claiming on behalf of itself and its members, the Rhode Island Chapter alleges...