S-4390-119
Read twice and referred to the Committee on Homeland Security and Governmental Affairs.
Sponsored by Mike Lee (R-UT)
What it does
This bill would repeal or amend dozens of federal statutes to eliminate contracting preferences and participation goals for businesses owned by socially and economically disadvantaged individuals and women. It would add an explicit statutory prohibition barring executive agencies from considering race, ethnicity, or sex when awarding federal contracts or grants, and from requiring contractors to do the same. It would also repeal the Minority Business Development Act of 2021 and reduce the airport improvement program's small business participation goal from 10% to 5%, removing the disadvantaged business enterprise component.
Who benefits
Small businesses not currently eligible for disadvantaged or women-owned set-asides, who would compete for a larger share of federal contracts. Larger businesses that currently face subcontracting requirements favoring disadvantaged firms. HUBZone-designated small businesses, which are retained as a preferred category. Service-disabled veteran-owned small businesses, which are also retained. Taxpayers, if broader competition lowers contract costs. Businesses that have faced legal uncertainty about the constitutionality of existing preference programs.
Who is hurt
Minority-owned small businesses that currently benefit from the SBA's 8(a) Business Development Program set-asides and other preference programs. Women-owned small businesses that currently receive set-aside contracts under the Women-Owned Small Business Federal Contract Program. Minority business development centers funded under the Minority Business Development Act of 2021, which would be repealed. Airport contractors who are disadvantaged business enterprises and currently benefit from the 10% participation goal. Businesses that have built their models around participation in these programs. Communities with high concentrations of minority- and women-owned businesses that rely on federal contracting revenue.
Supporters argue
Supporters argue that race- and sex-based contracting preferences violate the Constitution's equal protection principles and that the Supreme Court's decision in Students for Fair Admissions v. Harvard (2023) signals that race-conscious government programs face insurmountable strict scrutiny. They contend that federal contracting should be awarded on merit and price alone, and that existing preference programs create a two-tiered system that disadvantages equally qualified businesses solely because of their owners' demographics. They further argue that the retained HUBZone and service-disabled veteran preferences address economic disadvantage and public service without relying on race or sex classifications.
Opponents argue
Opponents argue that federal contracting preference programs exist because documented, persistent disparities in contract awards — confirmed by disparity studies across dozens of jurisdictions — show that minority- and women-owned businesses face systemic barriers unrelated to merit. They contend that the Supreme Court has repeatedly upheld narrowly tailored race-conscious contracting programs under Adarand Constructors v. Peña (1995) when supported by evidence of discrimination, and that eliminating these programs without addressing underlying market barriers would entrench existing inequities. They further argue that the bill's blanket prohibition goes beyond constitutional requirements by eliminating even evidence-based, narrowly tailored remedial programs.
Constitutional context
Federal race-conscious contracting programs are subject to strict scrutiny under the Fifth Amendment's Due Process Clause, as established in Adarand Constructors v. Peña (1995), requiring a compelling government interest and narrow tailoring. The bill's broad prohibition on race, ethnicity, and sex considerations in contracting reflects the legislative branch's judgment that existing programs cannot satisfy that standard, particularly in light of the Court's recent trajectory in SFFA v. Harvard (2023). Post-Loper Bright (2024), agency rules implementing preference programs would also face independent judicial review without deference to agency interpretations.
Checks and balances
Congress would gain authority by codifying a statutory prohibition that limits executive agency discretion; the executive branch loses the ability to implement race- and sex-conscious contracting preferences without new legislation, and courts retain authority to review whether the prohibition itself or its application raises constitutional questions.
Historical precedent
The Supreme Court upheld narrowly tailored federal race-conscious contracting programs under strict scrutiny in Adarand Constructors v. Peña (1995), and Congress has previously debated but not enacted a comprehensive statutory ban on such preferences at the federal level.