W.H. Scott Construction Co. v. City of Jackson

REVISED, January 24, 2000

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 98-60679
_____________________

W H SCOTT CONSTRUCTION COMPANY, INC

Plaintiff-Appellee

v.

CITY OF JACKSON, MISSISSIPPI; HARVEY JOHNSON, In his official
capacity as Mayor of the city of Jackson, MS; LOUIS E ARMSTRONG,
In his official capacity as a present member of the Jackson City
Council; MARGARET BARRETT, In her official capacity as a present
member of the Jackson City Council; CHIP RENO, In his official
capacity as a present member of the Jackson City Council; KENNETH
STOKES, In his official capacity as a present member of the
Jackson City Council; WILLIAM BROWN, In his official capacity as
a member of the Jackson City Council; ROBERT WILLIAMS, In his
official capacity as a present member of the Jackson City
Council; BEN ALLEN, In his official capacity as a present member
of the Jackson City Council

Defendants-Appellants

_________________________________________________________________

Appeal from the United States District Court
for the Southern District of Mississippi
_________________________________________________________________
December 23, 1999

Before KING, Chief Judge, and REYNALDO G. GARZA and EMILIO M.
GARZA, Circuit Judges.

KING, Chief Judge:

Defendants-Appellants City of Jackson, Mississippi, et al.,

appeal the district court’s grant of summary judgment to

Plaintiff-Appellee W.H. Scott Construction Company, Inc., in

1
Plaintiff-Appellee’s equal protection challenge to a policy

encouraging minority participation in city construction

contracts. We affirm.

I.

In 1985, the City of Jackson (the “City”) adopted a Minority

Business Enterprise Program (“MBE Program” or the “Program”).

The Program, designed to remedy the effects of past

discrimination, established a “goals” program for the utilization

of minority-owned businesses (“MBEs”), as well as those owned by

women (“WBEs”), in City contracts.1 The Program was managed by

the City’s Office of Business Development (“OBD”). Initially,

the minority-participation goal was 5% of all City contracts,

relative to the overall City budget, including contracts for

goods, services, and construction. Later the goal was increased

to 15%. The Program’s Liaison Officer within the OBD was charged

with, among other duties, “[c]oordinat[ing] procurement

activities with each City department head to ensure that the

maximum amount of dollars and contracts are afforded to minority

firms.”

Prior to implementing the Program and the original 5% goal,

the City established an advisory committee of local businesses

and conducted a series of hearings to document discrimination

against minority business owners. The 5% goal, however, was not

1
Although the Program, as well as the other City initiatives
referenced infra, established goals for the utilization of WBEs,
these goals are not specifically at issue in this case.
Therefore, we will not focus on them in our discussion.

2
based on any objective data. According to Willie Cole, manager

of the OBD, it was a “guess” that was adopted because the City

“felt like there was at least enough minority business out there

to do five percent of business to the City of Jackson.” The goal

was later increased to 15% because it was found that 10% of

businesses in Mississippi were minority-owned. The 15% goal

applied to all areas of procurement.

After the Program’s adoption, the City’s Department of

Public Works (the “Department”) began submitting reports of its

contracting activities to the OBD. In 1988, the Department

established its own policy for the use of the City’s goals. The

Department began including a “Special Notice to Bidders No. 1"

(the “Special Notice”) as part of the specifications for all City

construction contracts. The Special Notice encouraged prime

construction contractors to include in their bids 15%

participation by subcontractors certified as Disadvantaged

Business Enterprises (“DBEs”) and 5% participation by those

certified as WBEs. The Department implemented these goals to

effectuate its policy as stated in the Special Notice:

It is the policy of the City of Jackson Department of
Public Works (DPW) that small business concerns
(DBE/WBE)...shall have the maximum opportunity to
participate in the performance of contracts financed in
whole or in part with City funds. The Minority
Business Enterprise Program will be implemented in such
manner that participation of minorities and women will
be equitably distributed throughout the construction
industry.

A prime contractor could, however, support a lack of such

participation with a showing of good-faith efforts to meet the

3
goals.

The Special Notice defined a DBE as “[a] small business

concern which is owned and controlled by socially and

economically disadvantaged individuals.” In turn, “[t]he term

‘socially and economically disadvantaged individuals’ has the

meaning such term has under Section 8(d) of the Small Business

Act (15 U.S.C. § 637(d)) and relevant subcontracting regulations

promulgated pursuant thereto.” The Small Business Act (“SBA”)

defines socially disadvantaged individuals as “those who have

been subjected to racial or ethnic prejudice or cultural bias

because of their identity as a member of a group without regard

to their individual qualities.” 15 U.S.C. § 637(a)(5).

Economically disadvantaged individuals are defined as “those

socially disadvantaged individuals whose ability to compete in

the free enterprise system has been impaired due to diminished

capital and credit opportunities as compared to others in the

same business area who are not socially disadvantaged.” 15

U.S.C. § 637(a)(6)(A). Section 8(d) of the SBA pertains to

eligibility for disadvantaged status under subcontracting

provisions like the one at issue in the Special Notice. It

states that prime contractors are to “presume that socially and

economically disadvantaged individuals include Black Americans,

Hispanic Americans, Native Americans, Asian Pacific Americans,

and other minorities, or any other individual found to be

disadvantaged by the Administration pursuant to section 8(a) of

the Small Business Act.” 15 U.S.C. § 637(d)(3)(C). Therefore,

4
Sections 8(d) and 8(a) are both implicated in a determination of

disadvantage.

In 1991, the Mississippi legislature passed a bill that

would allow cities to set aside 20% of procurement for minority

businesses. According to an affidavit submitted by Willie Cole,

the Jackson City Council voted to implement the set-aside,

contingent on the City’s adoption of a disparity study conducted

pursuant to City of Richmond v. J.A. Croson, Co., 488 U.S. 469

(1989). Cole stated that he drafted “The Minority Business

Development Division Policy Document” (the “Policy Document”) in

1993 for the OBD to use as a guide until such disparity study

could be conducted. The Policy Document was based on research

from other cities and reiterated the goal of 15% minority

participation in the City’s contracts.

The City finally retained a company to conduct a disparity

study in 1994. The study analyzed the City’s contracting

activities within the Department of Public Works, as well as

those within other City government departments, and concluded

that the total underutilization of African-American- and Asian-

American-owned firms was statistically significant. The study

recommended that the City implement a range of MBE goals from 10-

15%, depending on the trade at issue. The City, however, was not

satisfied with the study and chose not to adopt its conclusions.

Instead, the City retained its 15% MBE goal while it searched for

another company to conduct a disparity study. Without adoption

of the study, the City never implemented the 20% set-aside

5
authorized by the state legislature.

In June 1997, the City advertised for the construction of

the Thalia Mara Hall toilet expansion project (the “Project”)

through its Department of Public Works. The Department included

its Special Notice in the Project’s specifications.

Sealed bids were opened on July 22, and Plaintiff-Appellee W.H.

Scott Construction Company, Inc. (“Scott”) was the lowest bidder.

On July 23, Scott informed the Department of its “attempt[s] to

secure DBE participation” in subcontracting for the Project,

including advertisements stating that it was “requesting bids

from qualified MBEs/WBEs....” Although Scott managed to get

11.5% WBE participation, it reported that the bids from DBE

subcontractors had not been low bids and that, therefore, its

DBE-participation percentage would be only 1%. The Director of

the Department encouraged Scott to “employ a minority vendor”

from whom to purchase materials in order to meet the goal.

Despite Scott’s failure to meet the DBE goal, on July 28,

the Department drafted a memorandum to Mayor Harvey Johnson (the

“Mayor”) recommending approval of the Scott bid. The memorandum

noted that the Scott bid exceeded the established budget for the

1996-97 fiscal year by $33,600 and that Scott had proposed a 1%

minority-participation rate. Three weeks later, Scott wrote to

the Department that it would not consider the Department’s

suggestions for increasing its minority participation. Scott

sent a copy of the letter to the Mayor. The Department and the

Mayor, as well as the City’s finance and legal departments,

6
approved Scott’s bid anyway, and it was then placed on the City

Council’s agenda.

On September 2, the City Council voted against the Scott bid

without comment. The vote was 4-3, with all of the African-

American Council members voting against Scott and all of the

white Council members voting for Scott. After the vote, Scott’s

president contacted City Council member Louis Armstrong to find

out why the bid was rejected. An argument ensued, and Armstrong

stated, “We have been left out of the process for 400 years,

we’re going to do what we have to do.” The City alleges that the

Scott bid was rejected because it exceeded the budget established

for the Project, not because Scott failed to reach the DBE

participation goal.

The City subsequently combined the toilet work at Thalia

Mara Hall with a renovation project, adding to the specifications

and increasing the estimated cost of the project from

approximately $200,000 to between $300,000 and $350,000. On

December 16, 1997, the City Council awarded the combined project

to Arcon Construction Company. At that meeting, Armstrong and

the Mayor explained that the Scott bid had been rejected because

it exceeded the amount allocated to the original Project from the

City’s 1996-97 funds. The City, they said, had decided to expand

the project, using funds allocated for the 1997-98 fiscal year,

in hopes of getting a better price.

Scott maintained that rejection of its bid was racially

motivated, and it filed the instant suit. In its complaint,

7
Scott alleged that the City’s minority-participation policy (the

“Policy”), as implemented through the Special Notice,

discriminated against nonminority contractors. Scott sought a

declaratory judgment holding the Special Notice unconstitutional

under the Equal Protection Clause, a permanent injunction

enjoining the City from enforcing its Policy, and compensatory

damages. Both Scott and the City filed motions for summary

judgment. Scott, having become aware of the City’s Program and

Policy Document during discovery, expanded its challenge to

include them as part of the relevant Policy.

The district court granted Scott’s motion. It agreed with

Scott that the relevant Policy included not just the Special

Notice issued by the Department of Public Works, but that it also

included the Program and Policy Document, which were issued by

the OBD and applied to all City contracts. The district court

concluded first that, under Northeastern Florida Chapter of the

Associated General Contractors of America, et al. v. City of

Jacksonville, 508 U.S. 656, 666 (1993), Scott had standing to

challenge the Policy, regardless of whether its bid was rejected

because of the Policy or because the bid was over budget. The

court then found that the Policy was unconstitutional because,

under City of Richmond v. J.A. Croson, Co., 488 U.S. 469 (1989),

the Policy lacked the requisite findings to justify its 15%

minority-participation goal and survive strict scrutiny. It

should be noted, however, that the district court restricted its

final judgment to striking minority-participation goals for the

8
City’s construction contracts only.

Thereafter, the court conducted an evidentiary hearing on

the issues of causation and damages. At the conclusion of the

hearing, the court rendered a bench opinion, which included its

findings of fact and conclusions of law. The court found that

Scott’s bid was rejected because Scott lacked sufficient minority

participation, not because it exceeded the City’s budget.

Further, the court awarded Scott $11,643 for lost profits. The

City now appeals.

II.

We review the grant of summary judgment de novo, applying

the same criteria used by the district court in the first

instance. See Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th

Cir. 1994); Conkling v. Turner, 18 F.3d 1285, 1295 (5th Cir.

1994). After consulting applicable law to ascertain the material

factual issues, we consider the evidence bearing on those issues,

viewing the facts and inferences to be drawn therefrom in the

light most favorable to the non-movant. See King v. Chide, 974

F.2d 653, 655-56 (5th Cir. 1992). Summary judgment is proper “if

the pleadings, depositions, answers to interrogatories,

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law.”

FED. R. CIV. P. 56(c).

With respect to the district court’s bench opinion, we

review the court’s findings of fact for clear error; its

9
conclusions of law are reviewable de novo. See Sepulvado v. CSC

Credit Serv., Inc., 158 F.3d 890, 895 (5th Cir. 1998).

III.

On appeal, the City contests both the district court’s grant

of summary judgment, as well as the court’s findings in its bench

opinion. We address each issue in turn.

A. Summary Judgment

1. Standing

In Northeastern Florida, 508 U.S. at 666, the United States

Supreme Court held that, for standing purposes, “a party

challenging a set-aside program...need only demonstrate that it

is able and ready to bid on contracts and that a discriminatory

policy prevents it from doing so on an equal basis.” The

district court found that the City’s Policy placed minority and

nonminority businesses on unequal footing and, thus concluded

that Scott had standing. We agree that Scott has standing, but,

before addressing the district court’s conclusions, we must first

clarify the scope of those conclusions.

The district court began its analysis on standing by

defining the challenged Policy as including the Department’s

Special Notice, as well as the City’s Program and Policy

Document. The City maintains that the district court should have

limited its analysis to the Special Notice. We need not decide

whether the district court should have so limited its analysis,

because even if we assume, arguendo, that the analysis should

have been so limited, Scott nevertheless prevails.

10
 The OBD manages the City’s Program pursuant to internal

guidelines set forth in its own Policy Document. The OBD’s task

in administering the Program is to effect strategies encouraging

minority participation in all contracts that the City lets,

whether through the Department of Public Works or other City

departments, for the City’s goods, services and construction

projects.2 The Department of Public Works is the department

responsible for letting construction contracts, and it adopted

its own policy for doing so–-the Special Notice.

The foregoing is relevant to a discussion of standing

because Scott does not have standing to challenge programs

relating to every contract let by the City. It is “able and

ready to bid,” within the meaning of Northeastern Florida, 508

U.S. at 666, only on construction contracts. See Contractors

Ass’n of Eastern Pennsylvania, Inc. v. City of Philadelphia, 6

F.3d 990, 997-98 (3rd Cir. 1993) (restricting construction

contractors’ standing to challenge city ordinance, which

established city-wide DBE participation goals, to standing to

challenge ordinance’s construction provisions, because “the

Contractors only have a personal interest in obtaining

construction contracts” that they are “ready and able” to bid on

(internal quotations omitted)). Indeed, the only evidence

2
These strategies are not limited to examining past
procurement activity and setting minority-participation goals
accordingly. The Program also includes strategies for developing
networks between minority businesses and the public/private
sector, and providing technical assistance and training sessions
for minority businesses.

11
presented in this case, and the focus of the district court’s

discussion, involved the participation of minority subcontractors

in construction contracts and the impact of the 15% goal on

Scott’s ability to compete in the construction industry3; no

evidence was offered on the contracting activities or Program

implementation in other City departments. See id. at 998-99

(“Accordingly, no evidence has been presented on other areas of

City contracting. To consider application of the Ordinance to

these contracts without the benefit of the adversary process

would require us to proceed without ‘data relevant and adequate

to an informed judgment.’”(quoting New York v. Ferber, 458 U.S.

747, 768 (1982))). We recognize that the Program is specifically

referenced in the Special Notice. For purposes of this opinion,

however, our focus is the manner in which, and the extent to

which, the Department’s implementation of the Program was

enforced. Therefore, we restrict our analysis to the

Department’s Special Notice.

Such restriction does not, however, alter the outcome of the

district court’s opinion. As noted above, the district court’s

final judgment restricted its holding to goal-oriented programs

3
In its brief, even Scott focuses our inquiry on this narrow
issue. It begins its argument by stating that “Scott challenged
the City’s policy of establishing a ‘goal’ of minority
participation of subcontractors in construction contracts awarded
by the City .... The City argues that the District Court erred in
granting summary judgment to Scott and declaring the City’s
policy unconstitutional.”

12
that affect City construction contracts.4 Thus, even though the

City avers that summary judgment was improper because there was a

question of fact as to what Policy was at issue, the question

does not affect the scope of the outcome.

The City contends, however, that Scott does not have

standing to challenge the Special Notice because Scott failed to

meet its threshold burden of proving that it was unable to bid on

construction contracts “on an equal basis.” Northeastern

Florida, 508 U.S. at 666. Specifically, the City avers that the

Department’s Special Notice does not disadvantage nonminority

contractors because it neither makes bidding for contracts more

difficult for nonminority contractors, nor does it impair

nonminority contractors’ ability to be awarded those contracts.

Usually, the City observes, if a nonminority contractor has the

low bid, it will receive the contract even though its bid might

lack minority participation and other bids include minority

participation. The City notes that Scott itself has received six

contracts since the Special Notice took effect, despite its

failure in each case to garner 15% minority participation. The

City argues further that minority and nonminority contractors

compete on an equal basis because the Special Notice applies

equally to minority and nonminority contractors.

In order to have standing, Scott must demonstrate: (1) an

4
In its “Conclusion,” the district court states, “The City
of Jackson Policy establishing goals of 15% minority
subcontractor participation in all City construction contracts
violates the 14th Amendment.”

13
“injury in fact,” meaning the “invasion of a legally protected

interest that is (a) concrete and particularized, and (b) actual

or imminent, not conjectural or hypothetical; (2) a causal

relationship between the injury and the challenged conduct,”

meaning that the “injury fairly can be traced to the challenged

action of the defendant, and has not resulted from the

independent action of some third party not before the court; and

(3) a likelihood that the injury will be redressed by a favorable

decision,” meaning that “the prospect of obtaining relief from

the injury as a result of a favorable ruling is not too

speculative.” Northeastern Florida, 508 U.S. at 663-64 (internal

quotations and citations omitted).

In equal protection cases challenging affirmative action

policies, “injury in fact” is defined as “the inability to

compete on an equal footing in the bidding process.” Id. at 666.

The City’s arguments are unavailing under this standard. For

Scott’s injury to be concrete and particularized, it need not

prove that it lost contracts because of the Department’s Policy;

Scott need only prove that the Special Notice forces it to

compete on an unequal basis. See id. (“The ‘injury in fact’...is

the denial of equal treatment resulting from the imposition of

[a] barrier, not the ultimate inability to obtain the benefit.”).

The question, therefore, is whether the Special Notice imposes an

obligation that is borne unequally by DBE contractors and non-DBE

14
contractors.5

Contrary to the City’s assertions, the inconsistency with

which the obligation is enforced is irrelevant, because it has

not negated the existence of the obligation. If a non-DBE

contractor is unable to procure 15% DBE participation, it must

still “satisfy the Department of Public Works that adequate good

faith efforts have been made to meet the contract goal” or risk

termination of its contract. Such efforts include advertising in

trade-association journals and “minority focus media,” direct

solicitation and follow-up with specific DBEs, and assistance in

obtaining bonding or insurance required by the contractor.

Further, imposition of the Special Notice on both DBE and non-DBE

contractors does not speak to whether DBE and non-DBE contractors

shoulder the same duties under the Special Notice.

The district court relied on the analysis of Concrete Works

of Colorado, Inc. v. City and County of Denver, 36 F.3d 1513

(10th Cir. 1994), to conclude that the Policy required Scott to

compete on an unequal basis with DBE contractors. In Concrete

Works, the Tenth Circuit held that where a city ordinance

5
The parties and the district court uniformly use the terms
“minority” and “nonminority” to describe “DBE”s and “non-DBE”s,
presupposing that certification as a DBE involves a racial
classification. Despite the apparent presupposition, the City
argues infra that DBE classification is not dependent on race,
but rather disadvantage. The distinction, however, is relevant
only to our constitutional analysis and the degree of scrutiny to
be applied to the classification. It is not relevant to an
Article III “case or controversy” requirement. Therefore, for
clarity’s sake, we presume no such racial classification in our
standing analysis and address only the differing obligations of
DBEs and non-DBEs, whether race-based or not.

15
expressly allowed minority contractors to use their own work to

satisfy minority participation goals, but nonminority contractors

were required to seek out minority subcontractors, “the extra

requirements impose costs and burdens on nonminority firms that

preclude them from competing with MBEs...on an equal basis.”6

Id. at 1518-19. The district court applied this analysis,

reasoning that the Policy at hand affords DBE contractors a

similar advantage. The district court, however, was relying on

language in the OBD’s Policy Document, which it considered part

of the relevant Policy.7 Although we are focusing our inquiry on

the Department’s Special Notice, exclusive of the OBD’s Policy

6
Admittedly, the City of Jacksonville’s ordinance at issue
in Northeastern Florida differs from the Department’s Special
Notice in that the Jacksonville provision required 10% of the
funds spent on city contracts to go to MBEs, and nonminority
contractors were foreclosed from bidding on those projects
reserved for MBEs. See Northeastern Florida, 508 U.S. at 658.
The Special Notice, on the other hand, does not impose a rigid
quota, nor does it foreclose non-DBE contractors’ opportunity to
bid. Non-DBE contractors in Jackson may submit bids on every
construction contract. Nevertheless, what is dispositive for our
standing analysis is that both the Jacksonville ordinance and the
Department’s Special Notice “make[] it more difficult for members
of one group to obtain a benefit than it is for members of
another.” Id. at 666.
7
The language in the Policy Document that the district court
relied upon states in relevant part:

The City may count as its M/WBE participation
expenditures to M/WBEs that perform a commercially
useful function in the work of a contract. An M/WBE is
considered to perform a commercially useful function
when it is responsible for execution of a distinct
element of the work of the contract and carrying out
its responsibilities by actually performing, managing
and supervising the work involved.

16
Document, we interpret the Special Notice’s provisions similarly.

The Special Notice states under the heading “OBLIGATION”

that “[t]he Contractor and any subsequent Subcontractor shall

ensure that small business concern (DBE/WBE) have [sic] the

maximum opportunity to participate in the performance of the

work included in this contract.” Further, “[f]ailure on the

part of the contractor to carry out the requirements set forth

shall constitute a breach of contract ....” Under the

subheading “GOALS,” the Special Notice states that “[t]he goal

may be attained by subcontracting to, procuring materials from,

and renting equipment from small business concerns (DBE/WBE).”

Unlike the ordinance at issue in Concrete Works, this language

does not expressly authorize a DBE contractor to satisfy DBE-

participation goals by keeping the requisite percentage of work

for itself. It would be nonsensical, however, to interpret it

as precluding a DBE contractor from doing so. If a DBE

contractor performed 15% of the contract dollar amount, it could

satisfy the participation goal and avoid both a loss of profits

to subcontractors and the time and expense of complying with the

“good faith” requirements. See Monterey Mechanical Co. v.

Wilson, 125 F.3d 702, 707 (9th Cir. 1997)(finding standing where

the challenged law exempted minority contractors from goal and

“good-faith” requirements); Concrete Works, 36 F.3d at 1518-19.

Non-DBE contractors obviously do not have this option. Thus,

the Special Notice places Scott and other non-DBE contractors at

a competitive disadvantage with DBE contractors.

17
 Scott has made an adequate showing that future injury is

imminent, entitling it to seek declaratory and injunctive

relief. The record indicates that Scott frequently bids on the

City’s construction contracts, and Scott represented that it

would continue to do so in the relatively near future.

Therefore, as long as DBE preferences are used in the

Department’s Special Notice, Scott is threatened with imminent

injury. In this way, standing’s other prerequisites, causation

and redressability, are also established, for removing the

preferences that cause Scott to compete on an unequal basis will

alleviate that “injury in fact.”8

2. Constitutional Analysis

The district court found that the City’s Policy--defined as

including the Special Notice, the Program, and the Policy

Document-–created race-based preferences in the City’s

construction contracting. It therefore applied strict scrutiny

to the racial classification and found the Policy violative of

the Equal Protection Clause. Although we address only the

Department’s Special Notice, we reach the same conclusion.9

8
The Supreme Court explained that causation and redressability
were collapsed into its definition of injury in fact. See
Northeastern Florida, 508 U.S. at 666 n.5 (stating, “It follows
from our definition of ‘injury in fact’ that petitioner has
sufficiently alleged both that the city’s ordinance is the
‘cause’ of its injury and that a judicial decree directing the
city to discontinue its program would ‘redress’ the injury.”).
9
Because the parties focus our inquiry here on racial
preferences, we will not address the analysis under intermediate
scrutiny required for sex-based preferences.

18
 The City contends that the Special Notice should not be

subjected to strict scrutiny. First, the City argues that

strict scrutiny should not be applied to policies that merely

encourage participation “goals,” rather than mandate strict

“quotas.” We agree with the district court, however, that it is

irrelevant whether the Special Notice establishes “goals” or

“quotas” for DBE participation. As the D.C. Circuit noted, the

distinction is immaterial because “[a]ny one of these techniques

induces an employer to hire with an eye toward meeting a

numerical target. As such, they can and surely will result in

individuals being granted a preference because of their race.”

Lutheran Church-Missouri Synod v. FCC, 141 F.3d 344, 350 (D.C.

Cir. 1998); see also Monterey Mechanical, 125 F.3d at 711

(stating that “the relevant question is not whether a statute

requires the use of such measures, but whether it authorizes or

encourages them” (quoting Bras v. California Pub. Utils.

Comm’n, 59 F.3d 869, 875 (9th Cir. 1995)); Concrete Works, 36

F.3d at 1516-19 (reviewing policy establishing “goals” rather

than “quotas” under strict scrutiny).

Next, the City contends that application of strict scrutiny

is inappropriate because the Department’s Special Notice does

not create a racial classification. The City avers that the

Special Notice’s DBE classification creates a preference based

on “disadvantage,” not race, and that a relaxed standard of

review applies to such preferences. The City is correct that

race-neutral preferences are not subject to strict scrutiny, but

19
we are not persuaded that the Special Notice is race-neutral.

First, although the Special Notice does not state

explicitly that a DBE is the same as an MBE, it does state

explicitly that the Department is implementing the MBE Program

so that “participation of minorities and women will be equitably

distributed throughout the construction industry.” Further,

even by its own terms, the Special Notice creates race-based

presumptions that warrant strict scrutiny.

The Special Notice relies on Section 8(d) of the SBA for

its definition of a DBE. As noted above, Section 8(d) states

that prime contractors are to “presume that socially and

economically disadvantaged individuals include Black Americans,

Hispanic Americans, Native Americans, Asian Pacific Americans,

and other minorities, or any other individual found to be

disadvantaged by the Administration pursuant to section 8(a) of

the Small Business Act.” 15 U.S.C. § 637(d)(3)(C). Sections

8(d) (the “8(d) program”) and 8(a) (the “8(a) program”), as well

as their implementing regulations, were also at the heart of the

contract at issue in Adarand Constructors, Inc. v. Pena, 515

U.S. 200 (1995).

In Adarand, a non-DBE subcontractor’s low bid was rejected

for a DBE subcontractor’s bid under a prime construction

contract let by a division of the Department of Transportation.

The prime contract provided that the prime contractor would

receive additional compensation if it hired subcontractors

certified as “socially and economically disadvantaged

20
individuals,” as that term was defined under Section 8(d).

Like the City has argued here, the government in Adarand argued

that “[t]he Subcontracting Compensation Clause program is...a

program based on disadvantage, not on race, and thus that it is

subject only to the most relaxed judicial scrutiny.” 515 U.S.

at 212-13 (internal quotations omitted).

In analyzing the 8(a) and 8(d) programs, the Supreme Court

noted the inconsistencies between the two sections’ implementing

regulations. Both programs provided explicitly for a race-based

presumption of social disadvantage. See 13 C.F.R.

§ 124.105(b)(1996). With respect to a determination of economic

disadvantage, however, the provisions were conflicting. Those

wishing to participate in the 8(a) program had to make an

individualized showing of economic disadvantage. See 13 C.F.R.

§ 124.106(a)(1996). It was unclear, however, whether

subcontractors in the 8(d) program were required to make

individualized showings, or whether, as Section 8(d) itself

suggests, the race-based presumption applied to both social and

economic disadvantage. Compare 13 C.F.R. §

124.106(b)(1996)(apparently requiring 8(d) participants to make

an individualized showing of economic disadvantage, though one

that is “less restrictive” than that required for 8(a)

participants) with 15 U.S.C. § 637(d)(3)(C), 48 C.F.R.

§ 19.703(a)(2)(1996)(apparently allowing 8(d) subcontractors to

rely on race-based presumptions for both social and economic

disadvantage). Nevertheless, in response to the government’s

21
argument that a relaxed level of scrutiny should apply because

its program was based on “disadvantage, not on race,” the Court

stated:

To the extent that the statutes and regulations
involved in this case are race neutral, we agree. [The
government] concede[s], however, that the race-based
rebuttable presumption used in some certification
determinations...is subject to some heightened level
of scrutiny. The parties disagree as to what that
level should be.

Adarand, 515 U.S. at 212-13 (internal quotations and citations

omitted). The Court held that strict scrutiny should apply. The

question of whether the SBA’s implementing regulations were

interpreted as requiring 8(d) subcontractors to make

individualized showings of economic disadvantage was relevant

only to the result of the application of strict scrutiny, not to

whether strict scrutiny should apply. See Adarand, 515 U.S. at

238-39 (remanding for determination of “whether any of the ways

in which the Government uses subcontractor compensation clauses

can survive strict scrutiny, and any relevance distinctions such

as [those involving a finding of economic disadvantage under the

8(a) and 8(d) programs] may have to that question....”).10 Thus,

10
On remand, the lower court held that, while Congress
might well have the authority under Section 5 of the Fourteenth
Amendment to “recognize a nation-wide evil” as a compelling
government interest for the SBA’s racial presumptions, the
subcontractor compensation clause at issue was not narrowly
tailored to serve that interest. Adarand Constructors v. Pena,
965 F. Supp. 1556, 1573-75, 1580-81 (D. Col. 1997)(noting that,
as relied upon in federal subcontractor compensation clauses, the
relevant SBA provisions and regulatory schemes were overinclusive
and underinclusive, and that the inconsistencies within them
“preclude a finding of narrow tailoring”). In response, the
Small Business Administration amended the SBA’s implementing
regulations, lowering the evidentiary burden for nonminority

22
we too are required to strictly scrutinize the Department’s

Special Notice.

In Croson, the Supreme Court applied strict scrutiny to the

City of Richmond’s Minority Business Utilization Plan, requiring

the City to demonstrate that there was a compelling interest for

the plan and that the plan was narrowly tailored to serve that

interest. See Croson, 488 U.S. at 493. The Court made clear

that combating racial discrimination is a compelling government

interest. See id. at 492. The Court noted, though, that a

governmental entity can enact a race-conscious program to remedy

past or present discrimination only where it has actively

applicants to claim eligibility for disadvantaged status from
“clear and convincing evidence” to “preponderance of the
evidence” (reducing under-inclusion), see 13 C.F.R. §
124.103(c)(1)(1999), and clarifying that the race-based
presumption of disadvantage is rebuttable (reducing over-
inclusion), see 13 C.F.R. § 124.103(b)(3)(1999).
The effect of these, and other amendments, to the SBA’s
regulatory scheme are not relevant to our discussion here, even
though the amendments would make it easier for nonminorities to
be certified as DBEs for purposes of the Department’s Special
Notice and thus add nominal credence to the City’s claim that DBE
status is not based exclusively, at least, on race. First, these
amendments did not exist at the time of the events in question
and cannot be relied upon now as bases for decisions then.
Second, even if these amendments were relevant, they would not
forestall application of strict scrutiny. Neither the SBA itself
nor its regulations have been declared unconstitutional–-Adarand
only addressed their use within a specific type of government
contract–-and racial presumptions remain incorporated explicitly
in the SBA. Therefore, strict scrutiny still applies to use of
these presumptions. The only difference today is that while the
executive branch is bound to follow and implement the SBA, its
regulations must be narrowly tailored to achieve its remedial
objective. See 63 F.R. 35726, *35728 (June 30, 1998)(noting that
the proposed amendment was “[i]n response to Adarand
Constructors, Inc. v. Pena, 115 Sup. Ct. 2097 (1995), which
requires [disadvantaged business] programs...to be ‘narrowly
tailored’”).

23
discriminated in its award of contracts or has been a “‘passive

participant’ in a system of racial exclusion practiced by

elements of the local construction industry.” Id. Therefore,

the governmental entity must “identif[y] that discrimination

with the particularity required by the Fourteenth Amendment,”

id., so that there is “‘a strong basis in evidence for its

conclusion that remedial action was necessary,’” id. at 500

(quoting Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 277

(1986)). Specifically, the Court stressed that a governmental

entity must establish a factual predicate, tying its set-aside

percentage to identified injuries in the particular local

industry. See id. at 499 (noting that the “defects are readily

apparent in this case. The 30% quota cannot in any realistic

sense be tied to any injury suffered by anyone.”).

The Court provided some guidance in determining what types

of evidence would justify the enactment of a remedial scheme.

It stated,

[i]f the City of Richmond had evidence before it that
nonminority contractors were systematically excluding
minority businesses from subcontracting opportunities
it could take action to end the discriminatory
exclusion. Where there is a significant statistical
disparity between the number of qualified minority
contractors willing and able to perform a particular
service and the number of such contractors actually
engaged by the locality or the locality’s prime
contractors, an inference of discriminatory exclusion
could arise.

...Moreover, evidence of a pattern of individual
discriminatory acts can, if supported by appropriate
statistical proof, lend support to a local
government’s determination that broader remedial
relief is justified.

24
Id. at 509 (emphases added)(citations omitted). Given Croson’s

emphasis on statistical evidence, other courts considering equal

protection challenges to minority-participation programs have

looked to disparity indices, or to computations of disparity

percentages, in determining whether Croson’s evidentiary burden

is satisfied. See Concrete Works, 36 F.3d at 1526-27; O’Donnell

Constr. Co. v. District of Columbia, 963 F.2d 420, 426 (D.C.Cir.

1992); Associated Gen. Contractors of California v. Coalition

for Economic Equity, 950 F.2d 1401, 1414 (9th Cir. 1991); Cone

Corp. v. Hillsborough County, Fla., 908 F.2d 908, 916 (11th Cir.

1990). Disparity studies are probative evidence of

discrimination because they ensure that the “relevant

statistical pool,” Croson, 488 U.S. at 501, of qualified

minority contractors is being considered.11

In the instant case, the City argues that it was error for

the district court to ignore its statistical evidence supporting

the Department’s use of racial presumptions in its DBE-

participation goals. The City highlights the disparity study it

commissioned in response to Croson, which noted:

White males and African Americans were the only two

11
We do not mean to embrace “the disparity study” as the
determinative piece of statistical evidence for the enactment of,
or justification for, a municipality’s affirmative action
program. Nor do we attempt to craft a precise mathematical
formula to assess the quantum of evidence that rises to the
Croson “strong basis in evidence” benchmark. The sufficiency of
a municipality’s findings of discrimination in a local industry
must be evaluated on a case-by-case basis. We note only that an
emphasis on disparity studies is particularly relevant to the
case at hand because the City contests the district court’s
treatment of its own study.

25
 groups to obtain public works contracts. White males
received 999 contracts, 94 percent of all contracts,
and $264.9 million, 97.7 percent of all Public Works
contract dollars. African Americans received 59
contracts, 6 percent, and $6.15 million, 2.3 percent
of contract dollars. No women owned firms or firms
owned by other ethnic groups received contracts ....

The study concluded that “the City Council [should] consider a

range of goals of 10-15 percent for both MBEs and WBEs.”

Unfortunately, whatever probity the study’s findings might

have had on our analysis is of no moment. The City refused to

adopt the study when it was issued in 1995, and its belated

reliance is unpersuasive. Furthermore, the study was restricted

to the letting of prime contracts by the City under the City’s

Program; it did not include an analysis of the availability and

utilization of qualified minority subcontractors, the relevant

statistical pool, in the City’s construction projects.

We do not doubt in the least that the City of Jackson

struggles, as it says, “to reverse the effects of its shameful

racial history.” It is not alone. The Supreme Court, however,

has dictated that strict scrutiny applies to racial

classifications, regardless of the race of those burdened or

benefitted by the classification, see Croson, 488 U.S. at 494

(citing Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 279-80

(1986)), and it has announced the type of proof that will

survive strict scrutiny, see id. at 509. Had the City adopted

particularized findings of discrimination within its various

agencies, and set participation goals for each accordingly, our

outcome today might be different. Absent such evidence in the

26
City’s construction industry, however, the City lacks the

factual predicates required under the Equal Protection Clause to

support the Department’s 15% DBE-participation goal. That is,

it has failed to establish a compelling interest justifying the

Special Notice. Because the Special Notice fails a strict

scrutiny analysis on this ground, we decline to address whether

it is narrowly tailored.

B. Bench Opinion

Scott sought damages from the City under 42 U.S.C. § 1983,

which requires the City’s actions to have been found “violative

of...constitutional rights and [to] have caused compensable

injury ....” Carey v. Piphus, 435 U.S. 247, 255 (1978)(quoting

Wood v. Strickland, 420 U.S. 308, 319 (1975))(internal

quotations omitted). Therefore, following its Opinion and Order

declaring that goals for the participation of DBE subcontractors

in the City’s construction contracts violated the Fourteenth

Amendment, the district court held an evidentiary hearing to

determine whether Scott’s bid was rejected because of its

failure to meet the unconstitutional goals, and, if so, what

damages Scott was entitled to. The district court found that

Scott’s bid was rejected because Scott failed to include 15% DBE

participation, and it awarded Scott approximately $11,600 in

lost profits.

The City has consistently maintained that Scott’s bid was

rejected because it exceeded the 1996-97 budget, not because

Scott failed to meet the DBE-participation goal. On appeal, the

27
City contends that material facts regarding causation were in

dispute and that the district court erred by relying on these

facts in its award of damages to Scott. The City would be

correct if it had requested a jury for resolution of these

issues, but because it did not, we review the district court’s

findings of fact for clear error. See Sepulvado, 158 F.3d at

895. A district judge’s assessment of damages is also a finding

of fact which, absent error of law, is entitled to the

deferential clearly erroneous standard of review. See Broehms

v. Crowell, 139 F.3d 452, 459 (5th Cir. 1998). A finding of fact

is clearly erroneous when, although there is enough evidence to

support it, the reviewing court is left with a firm and definite

conviction that a mistake has been committed. See Henderson v.

Belknap (In re Henderson), 18 F.3d 1305, 1307 (5th Cir. 1994).

If the district court’s account of the evidence is plausible in

light of the record viewed in its entirety, the court of appeals

may not reverse it even though convinced that, had it been

sitting as the trier of fact, it would have weighed the evidence

differently. See Anderson v. City of Bessemer City, 470 U.S.

564, 573-74 (1985).

The district court determined that Scott’s bid was rejected

for failure to comply with the DBE goal based on testimony

elicited at the hearing. Both sides presented plausible

testimony regarding the rejection of Scott’s bid, and the

district judge noted:

[T]his is a contest between credibility of the
testimony of W.H. Scott, the president of W.H. Scott

28
 Construction Company, Inc., the plaintiff, and Louis
Armstrong, the councilman for the City of Jackson who
was then and presently is serving as president of that
body. Based upon the court’s determination of the
credibility of these witnesses, there is
circumstantial evidence to consider.

In considering the circumstantial evidence, the court noted that

again it was “faced with the question of which side to believe

and must be guided by the burden of proof which is on the

plaintiff to prove its case by a preponderance of the evidence.”

The court was finally persuaded by three pieces of

circumstantial evidence that Scott’s bid was rejected because it

did not meet the DBE goal. First, the only discussions between

the Department and Scott prior to the rejection of Scott’s bid

focused solely on Scott’s lack of minority participation, not on

budgetary concerns. In addition, although the City maintains

that the City Council was not aware of those discussions between

Scott and the Department, and thus would not have based its

rejection of Scott’s bid on a failure to comply with the Special

Notice, Louis Armstrong offered conflicting accounts of whether

or not he had discussed Scott’s bid with the Department’s

manager prior to the City Council vote. Second, Armstrong first

testified that he had not discussed Scott’s bid with the other

City Council members prior to their vote, but he then

equivocated and testified that he had spoken to one or two of

them. Third, although the City claimed to have wanted to expand

the building project rather than accept Scott’s bid, the

district court noted that one of the reasons the City proffered

for expansion of the project–-a $125,000 water-proofing

29
assignment--never even occurred.

Given the deferential standard under which we review these

findings and the “credibility contest” the district court faced,

we conclude that it is plausible in light of the entire record

that the City Council rejected Scott’s low bid because Scott

failed to meet the Special Notice’s DBE-participation goal, not

because Scott’s bid exceeded the City’s budget. Furthermore,

because no arguments were presented contesting the amount of

damages awarded Scott, we affirm the award of lost profits in

the amount of $11,643.

IV.

For the foregoing reasons, the district court’s judgment is

AFFIRMED.

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