The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)
CONST 1963, ART 1, § 26:
Constitutionality of City's construction policy that provides bid discounts on the basis of race or sex
Const 1963, art 1, § 26 prohibits the implementation or application of the City of Grand Rapids' bid discount process set forth in Section 5.1(A)(1) of the Administrative Guidelines promulgated pursuant to City Policy 600-12 because the process grants preferential treatment to persons or groups based on race, sex, color, ethnicity, or national origin. Art 1, § 26 does not, however, prohibit the City from maintaining a bid discount process as long as the City amends the process to remove reliance on the unconstitutional factors of race, sex, color, ethnicity, or national origin.
Opinion No. 7202
April 9, 2007
Honorable Fulton J. Sheen
You have asked whether a construction
policy adopted by the City Commission of Grand Rapids on
The policy is
entitled "City Commission Policy No. 600-12" of the City of
The administrative guidelines promulgated pursuant to the construction policy contain various sections; however, you have expressed a specific concern about section 5.1(A)(1), regarding bid discounts for contractors who utilize particular subcontractors. (Administrative Guidelines for Equal Business Opportunity-Construction Policy ("Guidelines"), Section 1.1(A)(1).) 3
[A] business concern, which is at least 51% owned by one or more socially and economically disadvantaged individuals (as defined by the U.S. Small Business Administration), or in the case of any publicly owned business, at least 51% of the stock is owned by one or more socially and economically disadvantaged individuals; and whose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it.
(a) General. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. . . .
(b) Members of designated groups. (1) There is a rebuttable presumption that the following individuals are socially disadvantaged: Black Americans; Hispanic Americans; Native Americans . . . ; Asian Pacific Americans . . . ; Subcontinent Asian Americans . . . ; and members of other groups designated from time to time by SBA according to procedures set forth at paragraph (d) of this section. . . . [13 CFR 124.103(a) – (b) (emphasis added).]
(a) Presumption of disadvantage. (1) You must rebuttably presume that citizens of the United States (or lawfully admitted permanent residents) who are women, Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, or other minorities found to be disadvantaged by the SBA, are socially and economically disadvantaged individuals. [Emphasis added.]
Although this language gives the appearance of according a presumption of economic disadvantage to women and minorities, under the regulation those individuals must submit a notarized statement that their personal net worth does not exceed $750,000. 49 CFR 26.67(a)(2)(i).
49 CFR 26.67(d) provides that with respect to firms owned and controlled by individuals who are not presumed to be socially and economically disadvantaged, "a case-by-case determination" must be made regarding "whether each individual whose ownership and control are relied upon for DBE certification is socially and economically disadvantaged. . . . [T]he applicant firm has the burden of demonstrating . . . by a preponderance of the evidence, that the individuals who own and control it are socially and economically disadvantaged." 49 CFR 26.67(d). 5
The guidelines set forth a graduated scale of discounts ranging from 1% to 5% based on the percentage of DBE participation in the bid (Guidelines, Section 5.1(A)(1)(a)):
Certified DBE Subcontractor Participation Discount Percentage
1.0 - 2.5% 1.0%
2.51 - 5.0% 1.5%
5.01 - 7.5% 2.0%
7.51 – 10.0% 2.5%
10.01 – 15.0% 3.0%
15.01 – 18.0% 4.0%
Thus, the City's guidelines, by using the selected definitions, provide that a contractor may receive a bid discount by using DBEs owned or operated by "women," "Black Americans," "Hispanic Americans," "Native Americans," and persons of other listed ethnic groups, who are "rebuttably presum[ed]" to be "socially disadvantaged individuals." 6 Under the guidelines, the amount of the discount is directly related to the percentage of DBE subcontractor participation, i.e. the percentage of the total dollar value of the contract work that will be performed by DBEs. The greater the percentage of DBE participation, the higher the bid discount will be. For purposes of selecting the lowest bidder to receive award of the contract, the higher the bid discount, the lower will be the price of the bid used to select the low bidder, thereby favoring those bidders using DBEs. 7
Accordingly, the guidelines provide an advantage to contractors who make greater use of DBE subcontractors, compared to contractors who make less or no use of DBE subcontractors. Eligibility of a subcontractor to become a DBE relies on definitions of "socially and economically disadvantaged" that rebuttably presume that women, certain racial and ethnic minorities, and persons of certain national origin are socially disadvantaged, while all other socially and economically disadvantaged persons must prove that status by a preponderance of the evidence. The question is whether this policy constitutes "preferential treatment" in public contracting on account of race, ethnicity, national origin, or sex in violation of art 1, § 26.
In November 2006, the people of
(2) The state shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.
(3) For the purposes of this section "state" includes, but is not necessarily limited to, the state itself, any city, county, any public college, university, or community college, school district, or other political subdivision or governmental instrumentality of or within the State of Michigan not included in subsection 1. [Emphasis added.]
This section took effect on
There are three rules for construing
constitutional provisions. As stated by
the Michigan Supreme Court in
[T]he primary objective of constitutional interpretation is to realize the intent of the people by whom and for whom the constitution was ratified.
This Court typically discerns the common understanding of constitutional text by applying each term's plain meaning at the time of ratification. But if the constitution employs technical or legal terms of art, "we are to construe those words in their technical, legal sense."
The second rule is that, to clarify the meaning of a
constitutional provision where the meaning may be questioned, the circumstances
surrounding the adoption of a constitutional provision and the purpose sought
to be accomplished may be considered. Traverse City School Dist v Attorney General,
Art 1, § 26 states that a city
"shall not discriminate against,
or grant preferential treatment to, any individual or group on the basis
of race, sex, color, ethnicity, or national origin in the operation of . . .
public contracting." (Emphasis
added.) These terms are not ambiguous
and can be understood in a common sense. 10 To "discriminate against" means to
"make a difference in treatment" that is unfavorable to the person or
11 "Preferential treatment" may be
defined as "showing preference" in the treatment of a person or
12 The word "preference" can be
commonly understood to mean "the act, fact, or principle of giving
advantages to some over others." 13 Notably, this meaning is consistent with the
technical or legal definitions that have been accorded the term
The term "treatment" is self-explanatory
but can be understood as how something or someone is handled or dealt with. 15 Thus, the term "preferential treatment"
as used in art 1, § 26 can be understood as the act or fact of giving a
favorable advantage to one person or group over others based on race, sex,
color, ethnicity, or national origin. By
using the terms "discriminate against" and "grant preferential
treatment to," art 1, § 26 prohibits both the prejudicial treatment of a
person and its counterpart – the favorable treatment of a person or group – on
account of these classifications. The
meaning of this language is clear; therefore, there is no need to examine the
circumstances surrounding the adoption of this constitutional provision or the
purpose sought to be accomplished.
While the City's process does not establish a "quota" or participation "goal" as those terms are commonly understood, the policy does "discriminate against, [and] grant preferential treatment to, [an] individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of . . . public contracting." Const 1963, art 1, § 26.
That is, the bid discount process gives a benefit to the bidder by granting a bid discount based on the percentage of participation by subcontractors that qualify as DBEs – defined in terms of race, sex, ethnicity, and national origin. Where a bidder successfully obtains a contract as a result of a discount, both the bidder and its DBE subcontractors will receive the financial benefit of the contract, while other bidders and their non-DBE subcontractors will be denied the financial benefit of the contract. It is the status of the subcontractors as DBEs that will be relied upon to confer the favorable treatment of the bid discount.
The bid discount provision grants an advantage or "preference" based on race, sex, ethnicity, and national origin to minority- and women-owned subcontractors, who are entitled to a presumption that they are socially disadvantaged for purposes of acquiring DBE status. The ability of socially and economically disadvantaged persons to qualify their business as a DBE is expressly related to their membership in one of the designated groups. For DBEs, the City accords women and minorities the presumption that they are socially disadvantaged, while all other socially and economically disadvantaged persons must bear the burden of proving their status by a preponderance of the evidence. 16 Although it is possible that a non-minority/non-women-owned subcontractor could qualify as a DBE under the guidelines and incorporated definitions, the presumption in favor of women and the designated minorities and ethnic groups forces these individuals to compete for such status on an unequal basis. These are the kinds of preferences that art 1, § 26 prohibits. Consequently, insofar as the policy provides a bid discount based on the DBE status of subcontractors, the City's policy as implemented by the Administrative Guidelines violates the plain language of art 1, § 26 and is unconstitutional.
This conclusion is consistent with the
Wire Works, Inc v City of San Jose, 12 P3d 1068 (2000), the California
Supreme Court interpreted this prohibition against "discrimination" and
granting "preferential treatment" in the operation of public
contracting and accorded these terms their plain and ordinary meaning: "'Discriminate' means 'to make
distinctions in treatment; show partiality (in
favor of) or prejudice (against)'
. . . 'preferential' means giving 'preference,' which is 'a giving of priority
or advantage to one person . . . over others.'" Hi-Voltage Wire Works, 12
P3d at 1082 (internal citations omitted).
The Court concluded that this program
violated the plain language of Cal Const, art 1, § 31. The Court observed that the participation
component authorized or encouraged "what amount[ed] to discriminatory
quotas or set-asides, or at least race and sex-conscious numerical goals."
Hi-Voltage, Inc, 12 P3d at 1084. "A participation goal differs from a
quota or set-aside only in degree; by whatever label, it remains 'a line drawn
on the basis of race and ethnic status' as well as sex." Hi-Voltage,
Inc, 12 P3d at 1084 (internal citations omitted). The Court concluded that such a goal ran
"counter to the express intent . . . of Proposition 209." Hi-Voltage,
Inc, 12 P3d at 1084. See also Connerly v State Personnel Bd, 112 Cal
Rptr 2d 5 (Cal App, 2001), where the California Court of Appeals invalidated
several state statutory schemes as according preferential treatment in
violation of Cal Const, art 1, § 31. The City of
It must be recognized that programs
according race- and sex-based preferences in contracting have been upheld as
constitutional under equal protection principles. 19 By adopting Const 1963, art 1, § 26, however,
the people chose to prohibit both discrimination disfavoring and preferential
treatment favoring persons or groups based on race, sex, color, ethnicity, and
national origin. In other words, except
under limited circumstances, 20
Const 1963, art 1, § 26 thus may be
harmonized with the federal and state Equal Protection Clauses, which similarly
prohibit such discrimination. See
It is important to emphasize, however,
that this does not mean that the City of
It is my opinion, therefore, that Const 1963, art 1, § 26 prohibits the implementation or application of the City of Grand Rapids' bid discount process set forth in Section 5.1(A)(1) of the Administrative Guidelines promulgated pursuant to City Policy 600-12 because the process grants preferential treatment to persons or groups based on race, sex, color, ethnicity, or national origin. Art 1, § 26 does not, however, prohibit the City from maintaining a bid discount process as long as the City amends the process to remove reliance on the unconstitutional factors of race, sex, color, ethnicity, or national origin.
2 Art 1, § 26(4) provides an exception for actions that must be taken to maintain eligibility for federal programs or federal funding that is not addressed in this opinion because the policy also applies to city- and state-financed projects.
3 "Bid discounts" are defined as a "business incentive practice allowing an original bid to be reduced by a certain percentage for having engaged in activities that embrace the Mission Statement and Sustainability Vision Statement of the City with regard to diversity, strong economy, enriched lives, partnerships and regional equity and balanced with nature." (Guidelines, Section 2.1(2).) "The discounted bid will be used in the selection process for the project and the recommendation for award. However, the original bid amount will be the basis for contract award." (Guidelines, Section 5.1(A)(1).) Section 5.1(A) of the guidelines authorizes another type of bid discount, where a contractor may receive a 5% bid discount by bidding as a joint venture with an approved DBE. (Guidelines, Section 5.1(A)(2).) The analysis set forth in this opinion applies with equal force to that bid discount process.
4 The Guidelines then further define the terms "Minority," "Minority Business Enterprise (MBE)," "Women Business Enterprise (WBE)," and "Non-MWBE," which is a "business concern that is not a MBE or WBE." (Guidelines, Section 2.1(16)-(19).)
5 The Guidelines refer to a "Certified DBE." "Certified" or "Certification" is defined as "[t]he process designated agencies utilize to determine whether businesses meet eligibility criteria as bondafide" DBEs, MBEs or WBEs. (Guidelines, Section 2.1(4).) Similarly, "Qualified As Certified" means the process whereby the Equal Opportunity Department verifies businesses are certified by designated agencies to be a bonafide DBE, MBE or WBE." (Guidelines, Section 2.1(24).) City officials confirmed that the City's Equal Opportunity Department does not "certify" subcontractors as DBEs. Rather, the Department verifies whether a subcontractor has received DBE certification from a designated agency – the Michigan Department of Transportation, other state United States Department of Transportation certification programs, or the SBA, which agencies utilize the rebuttable presumption based on race and sex for DBE certification. Although the City does not perform the certification, the City incorporates the presumption in favor of women and minorities by adopting the definitions of DBE from these other sources.
6 The fact that women and minorities are not accorded a presumption of economic disadvantage is of no consequence in light of the definition of "economically disadvantaged individual," which first requires that an individual be socially disadvantaged. An individual who cannot prove social disadvantage necessarily fails to prove economic disadvantage.
7 The guidelines provide that in cases where bids, including discounted bids, are the same, the "recommended award shall be the bid with the lowest original bid amount; however, the City reserves the right to award a contract in the City's best interest, and therefore, may select a bidder other than the lowest." (Guidelines, Section 5.2(B).)
8 See http://miboecfr.nictusa.com/election/results/06GEN/90000002.html.
9 See Const 1963, art 12, § 2, and art 1, § 26(8).
10 It is appropriate to consult dictionary definitions existing at the time the people ratified a constitutional amendment in order to determine the common meaning of the terms adopted. See, e.g., Studier v Michigan Public School Employees' Retirement Bd, 472 Mich 642, 653; 698 NW2d 350 (2005).
11 See http://www.m-w.com/dictionary/discriminate. See also Merriam-Webster's Collegiate Dictionary, 11th Edition (2003), p 358, "discriminate" means "to make a difference in treatment or favor on a basis other than individual merit <in favor of your friends> <against a certain nationality>."
13 See http://www.m-w.com/dictionary/preference. See also Merriam-Webster's Collegiate Dictionary, 11th Edition (2003), p 979, "preference" means "the act, fact, or principle of giving advantages to some over others."
See Black's Law Dictionary, 8th Ed, p 1217,
"preference" means "[t]he act of favoring one person or thing
over another; the person or thing so favored." Courts have associated the term
"preference" or "preferential treatment" with the conferring
of an advantage. See, e.g.,
15 See http://www.m-w.com/dictionary/treating. See also Merriam-Webster's Collegiate Dictionary, 11th Edition (2003), p 1333, "treatment" means "the act or manner or an instance of treating someone or something."
16 Indeed, the term "socially and economically disadvantaged" is not race-neutral because of the underlying rebuttable presumptions. See Rothe Dev Corp v United States DOD, 324 F Supp 2d 840, 844 (D Tex 2004), rev'd on other grounds 413 F3d 1327 (CA 10, 2005); Sherbrooke Turf, Inc v Minn Dep't of Transp, 345 F3d 964, 969 (CA 8, 2003) (holding that although the program confers benefits on "socially and economically disadvantaged" individuals, a term which is race-neutral, strict scrutiny applies because the statute presumes minorities are in that class).
See Citizens Research Council of
See, e.g., Western
States Paving Co v
20 Art 1, § 26 does provide certain exceptions to its application:
(4) This section does not prohibit action that must be taken to establish or maintain eligibility for any federal program, if ineligibility would result in a loss of federal funds to the state.
(5) Nothing in this section shall be interpreted as prohibiting bona fide qualifications based on sex that are reasonably necessary to the normal operation of public employment, public education, or public contracting.
Section 26 also specifies that federal law or the federal Constitution prevails over any part of art 1, § 26 in conflict with those laws. Const 1963, art 1, § 26(7). This opinion does not address any effect these exceptions might have on the City's program in the absence of specific facts or circumstances upon which to analyze the exceptions' application.
The Equal Protection Clause of the Michigan
Constitution, Const 1963, art 1, § 2, is to be interpreted coextensively with
the federal Equal Protection Clause, US Const, Am XIV. Harvey v
22 Indeed, the United States Supreme Court has encouraged universities to move away from the use of race and sex preferences in admissions policies. See Grutter, 539 US at 342 ("Universities in California, Florida, and Washington State, where racial preferences in admissions are prohibited by state law, are currently engaged in experimenting with a wide variety of alternative approaches. Universities in other States can and should draw on the most promising aspects of these race-neutral alternatives as they develop.").