How the Supreme Court’s affirmative action ruling may change San Antonio’s contracting decisions

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A national political fight over affirmative action — including lawsuits filed systematically across the U.S. by conservative groups hoping to take the issue up to the Supreme Court — is quickly reshaping the procurement industry in one of the largest minority-majority cities in the country.

In September, San Antonio-based software company DigitalDesk Inc. sued Bexar County after it wasn’t selected to receive a federal pandemic aid grant, alleging the company was placed at the bottom of the priority list because its owner, Greg Gomm, is white and male.

A judge dismissed the case last month, saying Gomm didn’t have standing because he didn’t file the required paperwork to be considered for the grant.

Despite that setback, “it’s just a matter of time” before one of the cases makes it to the Supreme Court, Dan Lennington, a lawyer with the conservative Wisconsin Institute for Law & Liberty who is representing Gomm and plans to appeal the case, told the San Antonio Report.

“One of the long-term goals of our project is to dismantle all race-based preferences in the procurement industry or the contracting industry nationwide,” Lennington said.

Against that backdrop, the City of San Antonio has delayed action on updating its race-conscious scoring system for city contracts and is shifting focus toward a plan to help businesses regardless of race.

Meanwhile, Bexar County commissioned a study in 2021 that found that it had the justification to implement a race-conscious policy for small businesses, but delayed action to monitor the shifting judicial landscape. It has yet to implement such a policy.

Now, the threat of legal action from the right — combined with pressure from those who want existing race-conscious policies to stay in place — have complicated efforts to fairly disperse a rare influx of federal dollars locally.

The region is set to receive a bounty of federal money from the Biden Administration’s infrastructure laws in the coming years, and local leaders are under pressure to make sure as many local businesses as possible share in the wealth in projects like the city’s $2.5 billion airport redevelopment and VIA Metropolitan Transit’s $750 million rapid bus lines.

Bexar County’s distribution of federal pandemic relief to small businesses awarded preference based on race and gender, leading to the lawsuit.

The county and LiftFund, which administered the program, were able to convince a judge that Gomm didn’t have standing to bring the lawsuit because he didn’t provide the right tax forms.

Whether the practice of using race and gender in such a selection process would survive in today’s judicial landscape is increasingly uncertain.

“The Supreme Court opened the door for a flood of cases like this DigitalDesk” suit when it ruled last summer that colleges could no longer use race as a factor in admissions, said Neel Lane, a San Antonio lawyer known for championing civil rights causes who represented the county and LiftFund.

That decision established that race could no longer be used as a proxy for “disadvantaged” — something the conservative legal institute that’s representing Gomm is now seeking to apply to all government programs.

“If [local governments] want to help businesses that are disadvantaged, they should help businesses that are disadvantaged,” said Lennington. Instead they “basically stereotype people based on race … presuming that everybody in a certain racial category deserves help.”

His group won a lawsuit in March that forced a federal agency created to help minority-owned businesses to open its doors to all races. A different conservative legal foundation is battling the City of Houston over its minority contracting program.

“There are now a host of organizations purporting to champion the rights of white people to challenge any attempt to address social and economic imbalances,” Lane said. “The Supreme Court took a sledgehammer to that body of law with just one ill-considered decision.”

“Remove the training wheels”

San Antonio was an early adopter of race-conscious contracting, and one of the first cities in the country to put a program on the books to help more women and minority-owned businesses land government contracts in 1989.

By the city’s own metrics, it has been a huge success.

In 2023, just over half of the city’s contracts — worth about $330 million — went to 517 unique small, minority- and women-owned businesses, up 23% over the previous five-year time frame according to the program’s annual report.

Though there’s plenty of political appetite to expand on that progress, city leaders say the latest data indicates it’s now time to move away from race- and gender-conscious points in the scoring matrix, specifically because they’ve worked.

The city conducts a disparity study every five years to comply with legal requirements that say it must prove “compelling interest” in maintaining these programs. According to the most recent one, white women- and Hispanic-owned businesses were performing so well they no longer need a finger on the scale.

Further, the city found that in recent contracts, 97% of those businesses that were awarded with race and gender points would have won their contracts without them.

“The data is going in the right direction,” said Mayor Ron Nirenberg. “At some point, by design and by legal requirement, we have to start taking the training wheels off.”

Not everyone agrees. Notably, the most recent disparity study found that businesses owned by African Americans, Asians and Native Americans were still underutilized.

“All of those victories are because of race-conscious [points],” said Christopher Herring, a member of the Fair Contracting Coalition, which represents minority-owned businesses fighting the changes.

A plan to vote on new contracting policies without race and gender points was pulled from the City Council’s agenda in December amid concern that it was moving too swiftly away from a program that’s helping historically disadvantaged groups.

“It sounds like we’re taking our foot off the pedal and the race is still going on,” said Council Member Melissa Cabello Havrda, who represents the city's District 6, at the time. “We’re slowing down because we’re afraid someone else is going to slow us down.”

Proponents of preserving race and gender points have found some supporters on the City Council, who have urged the city to be bold in the face of a potential legal onslaught.

“I would much rather us do right and have a judge tell us that it’s wrong,” said District 2 Council Member Jalen McKee-Rodriguez. “We’re always being sued, we’re always going to be getting sued.”

A national focus on San Antonio

Landing a government contract can be life-changing for a small business.

With the federal government poised to spend north of a trillion of dollars on infrastructure projects, San Antonio was one of two cities chosen in 2022 for a national project by Drexel University’s Nowak Metro Finance Lab focused on getting that money to Black- and Hispanic-owned businesses.

Given the uncertainty of the legal landscape, however, San Antonio elected to widen the focus to helping all small businesses.

“It’s a different approach than contracting preference, per se,” said Assistant City Manager Alex Lopez, who oversees economic development. “But if we’re looking for the outcome of growing businesses, this is absolutely another approach that we can take.”

While the pivot away from racial preferences upsets some businesses, people who’ve been working on this issue for decades in San Antonio agree that most of the hurdles small businesses face getting contracts happen long before the selection process.

For example, small businesses have trouble getting certifications they need to compete for contracts, and the agency responsible for certifying them has been underfunded and understaffed for years.

The city and county tapped former mayor Henry Cisneros, who oversaw development of the city’s race-conscious contracting program in the late 1980s, to head up a group tasked with tearing down those barriers.

“It was a breakthrough then,” Cisneros said of the original race-conscious contracting program, but “this effort is much more comprehensive and has a better chance to enhance local economic development.”

Cisneros convened the top executives from more than a dozen public agencies in Bexar County, including public universities and utility companies, which spend billions of dollars with local businesses on goods and services each year.

The group plans to streamline and standardize its procurement procedures and create a physical office at UTSA where business owners can meet with experts to help them navigate the procurement process. Last month, its leaders also agreed to take over and pump money into the beleaguered certification agency.

While local governments try to thread the needle, Cisneros says that approach will allow decades of work to continue, “regardless of the current procurement policy debates.”

Disclosure: Institute for Economic Development - UTSA, LiftFund and Via Metropolitan Transit have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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