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LEGAL ISSUES

Test Case

For a guy bent on bringing down a multibillion-dollar federal program for minority contractors, Randy Pech is pretty low-key.
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This fall the Supreme Court will revisit an affirmative-action case that could bring an end to billions of dollars in federal contracts for minority businesses. It all began with one ordinary, outraged small-company owner.

For a guy bent on bringing down a multibillion-dollar federal program for minority contractors, Randy Pech is pretty low-key.

Sure, he's been called a "civil-rights hero." Sure, conservative icons like Newt Gingrich and Oliver North have congratulated him for his guts. But you won't hear Pech giving rousing anti-affirmative-action speeches or find him at the head of any Million White-Man March.

He's a "plodder," as he puts it, an ordinary, unassuming, workaday business owner who's spent 25 years building Adarand Constructors, a $5-million guardrail-installation company based in Colorado Springs. He hates public speaking. He even abandoned a possible career as a gym teacher partly because he didn't want to have to talk in front of a class. Yet Pech, a 47-year-old white man, also happens to believe he's a victim of discrimination. And despite his tendency to squirm in the spotlight, he's now a high-profile plaintiff on a key front of the affirmative-action fight.

It was Pech's lawsuit, after all, that prompted the Clinton administration's scramble to "mend, not end" affirmative action in federal contracting. Tired of losing bids on state and federal highway projects to woman- and minority-owned competitors, Pech first filed suit in 1990. Five years later the U.S. Supreme Court heard his case. He thought he'd won a great victory -- at least, that's what everybody (his lawyers, the news media, and his fellow conservatives) said. But despite the ruling, the Clinton administration saw enough leeway in the Court's language to overhaul specific programs while keeping minority contracting fundamentally intact. "They finessed it," scoffs Edward Blum, legal director for the American Civil Rights Institute, a nonprofit in Sacramento that's seeking to end affirmative action. "The Supreme Court left the door open just a crack, and they drove a dump truck through it."

Pech and his lawyers kept pushing, as their case bounced back to Colorado, then up and down through the federal courts. At press time they were scheduled for another Supreme Court hearing on October 31 in what looked like the final round of their 11-year fight. The case, of course, is just one of literally dozens of anti-affirmative-action suits that have clogged the federal courts, seeking to eliminate race-based preferences in everything from school admissions to government hiring. But Pech's suit has emerged as the test case on race preferences in federal contracting -- and one that could end affirmative action in federal contracting once and for all.


"We didn't get the job because of me? Run that by me again. I thought it was illegal to discriminate because of race."


Pech's lawyers argue that minority-contracting goals are a worn-out legacy of the civil-rights era, one that violates the Constitution by discriminating on the basis of race. They contend it's time to force the government to pack in those programs and abide by constitutional law. And if Pech's lawyers get their way? Long-standing federal initiatives, like the Small Business Administration's 8(a) program for disadvantaged minority-owned businesses, would have to go. So would minority-contracting goals at the Pentagon, the Department of Transportation, the Environmental Protection Agency, and every other federal agency, along with all federally mandated minority-contracting programs administered through the states.

The dollars at stake are staggering. Last year alone, federal agencies purchased some $13.1 billion in goods and services from minority-owned businesses as part of the effort to meet government contracting goals, according to procurement data from the General Services Administration. And that doesn't include the billions in federal funds for highway and housing construction and toxic-waste cleanup that are funneled through state-run minority-contracting programs.

Supporters of affirmative action say that although those programs have been effective, the results of decades of discrimination against Hispanics, African Americans, and other minorities have yet to be overcome. Eliminate federal contracting goals, they warn, and the doors that have gradually opened to minority businesses will once again slam shut. "It'll go back to a good-old-boy system, where racial minorities are simply cut out," says Julian Bond, chair of the NAACP.

"Randy Pech is attacking and dismantling programs that are desperately needed," echoes Bill Vandenberg, codirector of the Colorado Progressive Coalition. "The civil-rights community continues to fight the good fight, but the walls keep closing in."


At Home at Adarand

Adarand's Colorado Springs offices sit off a flat highway in a zone set aside for heavy industry, with a county correctional facility across the street. Pech's take on what his company does is simple enough: "You drive holes in the ground, buy guardrails, and install them."

Pech, who started Adarand in 1976, seems to get the job done. Today Adarand, with five six-person crews and five post-driver machines, handles roughly 100 guardrail projects a year across the state, with some, such as a recently completed $409,000 job on I-25, north of Monument, Colo., covering as much as 25,000 feet. "With the equipment we have ," says Pech, "there isn't a job in the state of Colorado we wouldn't feel comfortable bidding."

While Adarand picks up occasional work for private landowners, Pech says that more than 80% of the company's revenues come from public highway projects, with the bulk of that money coming through state contracts with the Colorado Department of Transportation (CDOT). It's a competitive business -- Adarand is just one of five guardrail companies in the state vying for contracts. But during the past decade Pech has managed to capture the largest share of that work: about $26 million of the $84 million awarded to the five companies. His two closest competitors each received a little more than $20 million in contracts.


MEND IT, DON'T END IT: Debra Gallegos of Colorado's Department of Transportation hopes minority-contracting programs can be saved.


Still, Pech contends that he's had to battle for his jobs, a fight he claims has been much tougher because he's a white male. Starting in the mid 1980s, Pech says, he began hearing that jobs that Adarand had been the low bidder on were going to minority- and woman-owned competitors, thanks to an affirmative-action program at the CDOT. Under the program, the state sets a goal of giving roughly 10% of total contracting dollars to companies that are run by minority or female owners, and prime contractors are typically required to show a good-faith effort to hire such companies as subcontractors; otherwise, they risk not being awarded contracts. At first, Pech says, he was stunned that his race was a factor. "I said, 'We didn't get the job because of me? Run that by me again. I thought it was illegal to discriminate because of race," says Pech. Then he got worried, because all four of his main competitors at the time were Hispanic- or woman-owned companies. "We're talking about half a dozen to a dozen times a year when I'm low and I don't get the work because of my race," says Pech. "I really thought that it could ruin my business."

Pech complained repeatedly about the problem to his wife, Val, who urged him to take action. "I tend to be the more feisty one," says Val, the daughter of a conservative Republican rancher. "My philosophy is, if you don't like something, do something or shut up about it."

The two drove up to Denver for hearings at the state highway commission. They also lobbied their state senator to try to stop the program, but those efforts went nowhere. Then Val's father, Jack Orr, who used to head the Colorado Cattlemen's Association, suggested that Pech talk to lawyers at the Mountain States Legal Foundation, in Denver.

Mountain States, a well-known bastion of conservatism, has long battled the federal government over grazing rights, environmental rules, and other states-rights issues. Lawyers there were immediately interested in Adarand's plight. In late 1989, Pech offered them the instance of alleged discrimination they were looking for to test racial preferences in federal contracting.

That year a prime contractor had awarded a guardrail job on a federal highway in southern Colorado to Gonzales Construction, a Hispanic-owned company, even though Adarand's bid was at least $1,000 lower. The reason: the prime contractor had received a $10,000 bonus from a division of the U.S. Department of Transportation to hire Gonzales Construction.

Mountain States agreed to handle the case pro bono, though Pech has been picking up the tab for copying and printing costs along with his lawyers' travel expenses. Since 1990, when the suit was filed, Pech estimates he has laid out from $25,000 to $30,000 to cover legal costs. As for the time expended, Pech says that he can't begin to estimate the number of hours he's spent going to hearings and talking to his lawyers about the case. And nothing prepared him for the media blitz that started in 1994, when the Supreme Court agreed to hear his case. "I was flabbergasted," he says. "I was talking with people in Australia and Canada for radio shows all over the world." Pech recalls that a BBC crew even came out to film one of Adarand's job sites, while NBC's Today show sent a limo to bring him to its local studio for a 5 a.m. interview.


Friends and Foes

For all the distractions of the case, Pech insists that it hasn't hurt his ability to run Adarand. He's been fortunate, he says, to have good managers in Gary Strauss, who oversees the work crews, and in vice-president Steve Goeglein, who's in charge of preparing all the company's bids for contracts.

Pech says his main responsibilities -- hiring, tracking financials, dealing with bankers and insurance companies, and handling general management matters -- are not particularly time sensitive. So even during the busiest stretches of his court fight, he's managed to make up the lost work time. "It's like going on vacation," he says. "You come back and you've got a lot of work to catch up on."

Adarand's revenues certainly don't seem to have suffered. Since 1990 the company's sales have more than doubled, from $2.5 million to nearly $5.5 million last year. Pech, though, insists that the company has never made a conscious push to grow. "The business was there, and we were in a position to take advantage of it," says Pech, who credits a Colorado road-construction boom for fueling growth. The company has been profitable since the early 1980s, he says, with average margins of 8% to 10%.

Adarand's office staff and road crew, meanwhile, have grown to roughly 40, including half a dozen Hispanics. Occasionally, during job interviews, Pech gets questions from prospective hires about all the lawsuit-related news clippings and photos (such as the shot of Pech and his wife with Gingrich) on his office wall. But Pech insists that within the company the suit has been a nonissue. He says that he has heard from plenty of contractors who support his lawsuit. Indeed, Jay Lower, head of the Colorado Contractors Association, says Pech's willingness to take a stand is admired. "We're an overregulated industry," says Lower, who complains that affirmative-action goals have given contractors all kinds of extra paperwork. "If we can get rid of some of those regulations, it's a positive."

Not that Pech's war against affirmative action has been entirely cost-free. Adarand VP Goeglein says that in at least two instances, general contractors have told him flat out that they wouldn't be hiring Adarand because of Pech's lawsuit. In one case Adarand had already been assured it had gotten the job. But after the original contractor turned the prime-contract work over to a minority-owned business, Goeglein claims, he was told that the minority contractor had insisted that they find another guardrail company.


WHITE BUSINESSMAN'S BURDEN: "I really thought that it could ruin my business," says Pech.


Though Pech says no one has ever publicly accused him of racism, competitors and civil-rights advocates alike have blasted him for being greedy, pointing out that Adarand already gets more than its share of Colorado's guardrail jobs. That work is paid for out of public coffers, says Vandenberg of the Colorado Progressive Coalition. He argues that minorities and women pay taxes just like Pech, and they deserve to get a portion of the work, too. "For Randy Pech to complain about not getting every single contract, it really looks like he's being a spoiled brat," says Vandenberg.

"Why is he fighting over that little piece of crumb?" adds Ron Montoya, a small-business owner in Denver, who founded the city's Hispanic Chamber of Commerce. "What does he want -- 100%? My God, give someone else a chance."

Pech has also had to face down charges that he's a hypocrite, given that three years ago he himself claimed he'd been discriminated against because he's white and applied to join minority- and woman-owned businesses in the CDOT's "disadvantaged business enterprise" program. Pech says he decided to apply after a federal judge stated that he had in fact been discriminated against and might be eligible. Though Adarand's application was accepted, Pech insists he never felt good about it. And on the advice of his lawyers, he dropped out of the program after only a year.

Pech insists that he was only trying to level the playing field. He points out that as of last December three of his rivals -- Gonzales Construction, Cruz Construction, and C & K -- were still in the program, though all of them have been in business for at least 15 years and, he argues, don't need the government's help to get contracts. "We all know how to do this. We all have the equipment. We all get our jobs done," says Pech.

Managers of C & K and Gonzales Construction didn't return numerous calls for comment, while Cruz Construction owner Joe Cruz declined to be interviewed. But even officials at the CDOT agree that Pech's complaint on that point may be valid. Although the CDOT sets income ceilings for some 350 participating disadvantaged businesses ($17.4 million a year in gross revenues for prime contractors and a maximum of roughly $11.5 million a year for subcontractors), there's no limit on how long those companies can remain in the program. Debra Gallegos, who runs the CDOT's Center for Equal Opportunity, agrees that the rules should be changed. "We'd be supportive of a graduation clause," she says.

Gallegos, however, insists that overall the program is still an effective tool for helping undercapitalized minority companies get established. "You can't keep saying 'We're going to help minorities' unless you develop an infrastructure to do that," says Gallegos. "Why in the world isn't there more lobbying to mend [the program], rather than get rid of it?"

Because of the program, Hispanic- and woman-owned construction businesses in Colorado have made significant progress in landing contracts. But, according to Gallegos, three years ago, when the CDOT determined that companies owned by Hispanics and women were finally winning a proportionate share of work and took them off the state's priority-hiring list, the number of contracts they received almost immediately dropped. "We thought industry would continue using them, but utilization went down," says Gallegos. Consequently, last spring the CDOT put Hispanic- and woman-owned construction companies back on its priority-hiring list.


Endgame

Of course, Colorado's priority-hiring list could soon be phased out altogether. If the Supreme Court sides with Pech, the state's minority-contracting program, along with every other federally mandated minority program in the country, would be forced out of business.

Many legal observers contend the Court is still too torn on the topic of affirmative action to actually go that far. But Pech's lawyers insist the Court wouldn't have agreed to hear Adarand's case again unless it was prepared to act, and they praise Pech for sticking to the fight. "He's a civil-rights hero," declares J. Scott Detamore, a lawyer on Pech's legal team. "It takes a helluva lot of guts to do what he did and hang in there."

To old-school civil-rights leaders like Bond, however, Pech's case represents yet another huge potential setback in the ongoing fight against discrimination. "Randy Pech is no more of a civil-rights hero than Bull Connor [the segregationist police commissioner] in Birmingham was," says Bond.

Minority-contracting programs don't help only individual companies, adds Denver businessman Montoya. They also help create jobs and promote investment in minority communities. "It's a shame that people don't understand that this country is built on diversity," he says.

Pech, for his part, is hoping that the Supreme Court will finally deliver a definitive ruling. And he's looking forward to his lawsuit's being over. "I'd like to concentrate on my business," he says, "instead of trying to fix federal policy."

Susan Hansen is a senior editor at Inc.


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