Associated General Contractors of California, Inc., et al.,plaintiffs-appellants, v. City and County of San Francisco, Defendant-appellee,andsan Francisco Black Chamber of Commerce, et al.,intervenors-defendants/appellees, 813 F.2d 922 (9th Cir. 1987)

We consider a challenge to an ordinance of the City and County of San Francisco (the city) giving various preferences to minority-owned, women-owned and locally-owned business enterprises (MBEs, WBEs and LBEs). The district court upheld the ordinance, rejecting claims that it violates the city's charter, federal civil rights laws and the equal protection clause of the fourteenth amendment.Facts

On April 2, 1984, after numerous hearings and considerable debate, the San Francisco Board of Supervisors enacted Chapter 12D of the City's Administrative Code (the ordinance). The ordinance was designed to increase the participation of MBEs, WBEs and LBEs in municipal contracting, and thereby to alleviate the "historic discrimination against minorities and women, often officially sanctioned and enforced by government from the inception of our Republic to the present." Ordinance Sec. 12D.2(1).

The ordinance employs four principal methods. First, it requires each city department to set aside 10 percent of its purchasing dollars for MBEs and 2 percent for WBEs. Id. Sec. .8(B) (2). Second, it gives MBEs, WBEs and LBEs a 5 percent bidding preference for those contracts put out to bid.¹  Id. Sec. .8(B) (3). Third, it requires each city department to establish a yearly goal for the percentage of contracting dollars to go to MBEs, WBEs and LBEs. For certain public works contracts, a prospective prime contractor must submit a bid that meets or exceeds the department's goal by distributing among appropriate subcontractors the requisite percentage of the contract's value. Id. Sec. .9(B) (1). Finally, the ordinance establishes as an overall goal that 30 percent of the city's contracting dollars shall go to MBEs and 10 percent to WBEs. Id. Sec. .3. The ordinance is to remain in effect until that goal is reached. See id. Sec. .15(A).

Appellants sued seeking declaratory and injunctive relief. Their motion for a preliminary injunction was denied on November 5, 1984. They appealed that decision but, before this court could rule, the district court heard the parties' cross-motions for summary judgment and granted that of the appellees. Associated Gen. Contractors v. City & County of San Francisco, 619 F. Supp. 334, 335 (N.D. Cal. 1985). The preliminary injunction appeal was then dismissed, appellants pursuing instead their appeal from the district court's decision on the merits.² 

Contentions of the Parties

Appellants mount their attack on three fronts. First, they argue that, as to contracts valued over $50,000, the preferences violate a San Francisco City Charter provision requiring that contracts be awarded to "the lowest reliable and responsible bidder." S.F. Charter Sec. 7.200 (1986).³  Next, they contend that the preferences for MBEs violate three separate federal civil rights statutes: 42 U.S.C. §§ 1981, 1983, 2000d (1982). Finally, they argue that all the preferences violate the equal protection clause of the fourteenth amendment of the United States Constitution. Appellees forcefully dispute each of these contentions.

Jurisdiction

The district court had jurisdiction over the federal claims pursuant to 28 U.S.C. §§ 1331, 1343(a) (3), and pendent jurisdiction over the state law claim. See UMW v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966). We have jurisdiction under 28 U.S.C. § 1291.

Discussion

A. Appellants claim that, by compelling city departments to accept bids that are not the lowest, the ordinance violates S.F. Charter Sec. 7.200 which provides:

When the expenditure for any public work or improvement shall exceed the sum of fifty thousand dollars ($50,000), the same shall be done by contract, except as otherwise provided in this charter. The head of the department in charge of or responsible for the work for which a contract is to be let, or the purchaser of supplies in the case of purchases of materials, supplies and equipment, shall let such contract to the lowest reliable and responsible bidder.... [Emphasis added.]

In Inglewood-Los Angeles County Civic Center Authority v. Superior Court, 7 Cal. 3d 861, 500 P.2d 601, 103 Cal. Rptr. 689 (1972), the California Supreme Court interpreted California Government Code section 25454, a provision very similar to charter section 7.200. It held that the term "responsible"

has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work. Thus, a contract must be awarded to the lowest bidder unless it is found that he is not responsible, i.e., not qualified to do the particular work under consideration.

Id. at 867, 500 P.2d at 604, 103 Cal. Rptr. at 692 (citations omitted). In reaching this result, the court relied on cases interpreting similar language in other statutes and, in one case, West v. City of Oakland, 30 Cal. App. 556, 159 P. 202 (1916), a city charter. We followed Inglewood in overturning a school district's plan for accepting higher bids from minority contractors, stating that " [w]e do not think that the California Supreme Court would construe the term ... differently from the construction it gave the same language in Inglewood; the statutes are virtually identical." Associated Gen. Contractors v. San Francisco Unified School Dist., 616 F.2d 1381, 1385 (9th Cir. 1980) (Unified School District) . We have found no California case interpreting the term "responsible" any other way.

Despite these seemingly compelling authorities, the district court adopted a much more expansive construction of charter section 7.200, concluding that "the concept of responsibility is sufficiently flexible to embody other legitimate municipal concerns such as the remedying of past discrimination." 619 F. Supp. at 336.⁵  The district court purported to follow the reasoning of Southwest Washington National Electrical Contractors Association v. Pierce County, 100 Wash. 2d 109, 667 P.2d 1092 (1983), which interpreted the term responsible to mean "socially responsible."⁶  In the Washington Supreme Court's view, a business that failed to meet affirmative action goals was socially irresponsible. Id. at 115, 667 P.2d at 1095-96. The district court also reasoned that its interpretation of the term responsible "is clearly consistent with the two purposes generally underlying competitive bidding statutes: 1) to protect the general public from cronyism or collusion in the awarding of contracts and, 2) to provide a fair forum for potential bidders." 619 F. Supp. at 337 (citing Southwest Washington, 100 Wash. 2d at 116, 667 P.2d at 1096).

We are unable to approve the district court's interpretation of the term "responsible" in San Francisco charter section 7.200. First, and most fundamentally, the district court was led astray by following inapposite authorities and ignoring pertinent ones. Southwest Washington expressly rejected Ninth Circuit precedent, 100 Wash. 2d at 115, 667 P.2d at 1096; the district court was not free to follow suit. Unified School District and the California cases on which it relies construed language very similar to that in charter section 7.200. The district court was required to follow Ninth Circuit precedent in applying California law as California courts construe it. And California courts have uniformly construed the term "lowest responsible bidder" to mean the bidder who can be expected to successfully complete the contract for the lowest price.⁷ 

Moreover, we find the district court's reasons for following Southwest Washington unpersuasive. Its assertion that a broad reading of the term "responsible" is consistent with the purposes underlying competitive bid statutes misconstrues those purposes. The first purpose enumerated by the district court--protecting the public from cronyism and collusion--is much too narrow. Competitive bid statutes are designed to protect against a variety of ills that might befall the government procurement process: sloth, lack of imagination or carelessness on the part of those who award public contracts; inadequate notice to potential bidders, causing contracting officers to act on the basis of ignorance or misinformation; and, perhaps most important of all, insufficient competition to assure that the government gets the most work for the least money. See generally J. Whelan & R. Pasley, Cases & Materials on Federal Government Contracts 175-81 (1975).

The second purpose cited by the district court--"to provide a fair forum to potential bidders"--is far too broad. Nothing in charter section 7.200, or in any other competitive bid statute of which we are aware, assures that contractors will be treated fairly in any and all respects. The provision assures only that responsible contractors who submit the lowest bid will be awarded the contract. Under the district court's interpretation, there is no limit to the type of fairness a city could seek to achieve, defeating the charter's mandate that contracts be awarded to the lowest bidder.⁸ 

Finally, the district court's ruling goes far beyond even the logic of Southwest Washington. The Washington Supreme Court there held that a bidder is responsible if he awards a portion of his subcontracts to MBEs and WBEs. Under that approach, a contractor has a fair measure of control over whether or not he is deemed responsible; an irresponsible contractor can become responsible by awarding a larger share of subcontracts to MBEs and WBEs. Southwest Washington, 100 Wash. 2d at 112, 667 P.2d at 1094. Thus, while the Washington Supreme Court gave the term "responsible" an expansive interpretation, it retained the concept's essential characteristic as a description of a bidder's willingness and ability to comply with applicable standards. By contrast, the district court here removed all connection between "responsibility" and volitional action. A contractor is deemed responsible not because of how it conducts its business but because of what it is: A firm that qualifies as an MBE, WBE or LBE is conclusively deemed responsible; a firm that does not is conclusively deemed irresponsible. By holding that "the concept of responsibility is sufficiently flexible to embody other legitimate municipal concerns such as the remedying of past discrimination," 619 F. Supp. at 336, the district court transformed a limitation on the city's power into a broad authorization for preferring some contractors over others on the basis of innate characteristics such as race and gender, or whatever other "legitimate municipal concerns" the city might wish to pursue. We doubt that even the Southwest Washington court would have gone that far.

B. Appellees argue in the alternative that the ordinance does not violate the city charter because it does not contravene an express prohibition. They note that there is no express prohibition against affirmative action, and so urge us to conclude, as did the district court, that the ordinance must be valid.

We reject this argument for two reasons. First, whether or not the charter contains a prohibition against affirmative action is irrelevant. It does include a general prohibition against accepting other than the lowest bid, subject only to specific exceptions. See pp. 927-928 infra. Second, appellees misunderstand the longstanding rule that there are no limits to a chartered city's regulation of municipal affairs "except as expressly limited by the charter provisions." City of Grass Valley v. Walkinshaw, 34 Cal. 2d 595, 599, 212 P.2d 894, 896 (1949). While, as appellees argue, " [a]ll rules of statutory construction as applied to charter provisions ... are subordinate to this controlling principle," id., this simply means that an older principle--that cities receive only those powers delegated by the state--does not apply to chartered cities. See id.; see, e.g., Long v. City of Fresno, 225 Cal. App. 2d 59, 64-65, 36 Cal. Rptr. 886, 890-91 (1964). This rule only prohibits inferring limitations from the absence of an express grant of power; it provides no help in interpreting an express limitation like section 7.200.

C. Finally, amicus supporting the city notes that the charter expressly allows the Board of Supervisors to accept bids other than the lowest in some circumstances. For example, charter section 7.204 provides that

[in] any contract for any public work or improvement, or for the purchase of materials ... [the Board may provide] a preference in price not to exceed 10 percent ... in favor of such materials as are to be manufactured, fabricated or assembled within the City and County of San Francisco as against similar materials which may be manufactured, fabricated or assembled outside thereof.

In addition, of course, section 7.200 itself exempts contracts worth $50,000 or less from the low bid restriction.

Insofar as the city charter itself provides exceptions to the rule that contracts be awarded to the lowest responsible bidder, preferences falling within the contours of those exceptions are valid. But it is difficult to understand how this helps the city with respect to those preferences that do violate charter section 7.200. The normal inference is to the contrary. Since the charter's framers found it necessary to add express exceptions to the requirement that all contracts go to the "lowest reliable and responsible bidder," charter section 7.200 can only be read as a general limitation on the city's power.⁹ 

In sum, we conclude that the ordinance violates the city charter insofar as it authorizes the award of contracts that are worth more than $50,000 and are not covered by charter section 7.204 to other than lowest responsible bidders. Insofar as the ordinance's bid preferences, subcontracting goals and set asides would result in awards that violate the charter, they are void. Because the ordinance contains a severability provision, it continues to apply to contracts for $50,000 or less.¹⁰  We must therefore consider appellant's remaining challenges to the ordinance insofar as it applies to such contracts for $50,000 or less.

Because not all classifications drawn in the ordinance are equally suspect, we discuss the ordinance's treatment of MBEs, WBEs and LBEs separately.

The parties disagree on the proper level of review. Appellants argue that the ordinance's racial and ethnic preferences should be subjected to strict scrutiny; the city claims that a three part test, examining the Board of Supervisors' authority, findings and methods, is appropriate. Both parties are right. The level of review is indeed strict scrutiny, but not the old strict scrutiny that was " 'strict' in theory but fatal in fact." Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 361-62, 98 S. Ct. 2733, 2784-85, 57 L. Ed. 2d 750 (opinion of Brennan, White, Marshall & Blackmun, JJ.); see also United States v. Paradise, --- U.S. ----, 107 S. Ct. 1053, 94 L. Ed. 2d 203 (1987) (plurality opinion); Wygant v. Jackson Bd. of Educ., --- U.S. ----, 106 S. Ct. 1842, 1852, 90 L. Ed. 2d 260 (1986) (O'Connor, J., concurring). The form that scrutiny has taken in affirmative action cases does call for an examination of the three factors appellees suggest and all sides discuss. First, we must consider whether the city had the authority to act; second, we must examine whether its findings are adequate; finally, we must determine whether the means it selected are appropriate.¹² 

Relying on Fullilove v. Klutznick, 448 U.S. 448, 499, 100 S. Ct. 2758, 2785, 65 L. Ed. 2d 902 (1980), appellants contend that only Congress may enact affirmative action programs because only Congress has the authority to act under section 5 of the fourteenth amendment. However, appellants overlook that the Fullilove plurality relied on section 5 as authority only for the federal government's imposition of affirmative action on state and local governments. Fullilove, 448 U.S. at 476-78, 100 S. Ct. at 2773-75 (opinion of Burger, C.J.). It relied on the commerce clause to justify the imposition of the program on private contractors. Id. at 475-76, 100 S. Ct. at 2773-74.

Like the federal government, a state or its political subdivision has the authority--indeed the "constitutional duty," Wygant, 106 S. Ct. at 1856 (O'Connor, J. concurring) (emphasis original)--to ascertain whether it is denying its citizens equal protection of the laws and, if so, to take corrective steps. See Ohio Contractors Ass'n v. Keip, 713 F.2d 167, 172-73 (6th Cir. 1983); South Fla. Chapter v. Metropolitan Dade County, 723 F.2d 846, 852 (11th Cir.), cert. denied, 469 U.S. 871, 105 S. Ct. 220, 83 L. Ed. 2d 150 (1984); see also Paradise, --- U.S. at ----, 107 S. Ct. at 1065 (" [t]he government unquestionably has a compelling interest in remedying past and present discrimination by a state actor") (plurality opinion), id., at ----, 107 S. Ct. at 1075 (Powell, J., concurring). More than that we cannot say here. The extent to which the city may act depends on the factual record prompting the action and its range of available options, subjects we discuss below.

i. The city is not just like the federal government with regard to the findings it must make to justify race-conscious remedial action. As Justice Powell noted in his Fullilove concurrence, " [t]he degree of specificity required in the findings of discrimination and the breadth of discretion in the choice of remedies may vary with the nature and authority of a governmental body." 448 U.S. at 515-16 n. 14, 100 S. Ct. at 2794, n. 14. This notion is also reflected in the plurality opinion:

Here we deal ... not with the limited remedial powers of a federal court, for example, but with the broad remedial powers of Congress. It is fundamental that in no organ of government, state or federal, does there repose a more comprehensive remedial power than in the Congress, expressly charged by the Constitution with competence and authority to enforce equal protection guarantees.

Id. at 483, 100 S. Ct. at 2777 (emphasis added).

The Court's concern with the level of government adopting race-conscious legislation is based on important theoretical and practical considerations. See generally Note, A Madisonian Interpretation of the Equal Protection Doctrine, 91 Yale L.J. 1403 (1982) (Madisonian Interpretation) . As Justice Stevens noted in his Fullilove dissent, "because classifications based on race are potentially so harmful to the entire body politic, it is especially important that the reasons for any such classification be clearly identified and unquestionably legitimate." 448 U.S. at 534-35, 100 S. Ct. at 2803-04 (footnote omitted); see also Paradise, --- U.S. at ---- n. 2, 107 S. Ct. at 1075 n. 2 ("racial distinctions are inherently suspect") (Powell, J., concurring). Where Congress itself acts, the broad spectrum of interests represented within our federal structure plays an important role in guaranteeing that individual rights will not be sacrificed to political expediency. However, as the Founding Fathers recognized, the narrower a government's domain, the greater the likelihood of oppression:

The smaller the society, the fewer probably will be the distinct parties and interests composing it; the fewer the distinct parties and interests, the more frequently will a majority be found of the same party; and the smaller the number of individuals composing a majority, and the smaller the compass within which they are placed, the more easily will they concert and execute their plans of oppression. Extend the sphere, and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength and to act in unison with each other.

The Federalist No. 10, at 22 (J. Madison) (2d ed. Johns Hopkins Univ.Press 1966). See also Madisonian Interpretation, 91 Yale L.J. at 1410 ("state procedure and structure reinforce the tendency of majorities to tyrannize minorities, federal procedure and structure weaken any such tendency").

While we have no occasion to define the precise contours of state or local governments' power to pass laws that favor one race or ethnic group over another, we note that the Supreme Court "never has held that societal discrimination alone is sufficient to justify a racial classification" by such entities. Wygant, 106 S. Ct. at 1847 (plurality opinion); see also id. at 1854 (O'Connor, J., concurring). At a minimum, the state or local government must be acting to remedy government-imposed discrimination, perpetrated by it or by one of its departments or divisions.¹³  Unlike Congress, state or local governments do not have the power to discriminate on the basis of race simply to dispel the lingering effects of societal discrimination, "an amorphous concept of injury that may be ageless in its reach into the past." Bakke, 438 U.S. at 307, 98 S. Ct. at 2757 (opinion of Powell, J.); see also Wygant, 106 S. Ct. at 1854 (O'Connor, J., concurring).

The requirement that the governmental entity itself have discriminated finds support in a recent Supreme Court case on the subject: " [S]ome showing of prior discrimination by the governmental unit involved [must be made] before allowing limited use of racial classifications in order to remedy such discrimination." Wygant, 106 S. Ct. at 1847 (plurality opinion) (emphasis added); id. at 1853 (O'Connor, J., concurring).¹⁴  The governmental body in Wygant, a school board, had determined that the percentage of minority teachers was lower than the percentage of minorities in the student population and concluded that this was the result of societal discrimination. Such ambient discrimination was held to be an insufficient basis for upholding the school board's affirmative action program.

We recognize that the plurality opinion in Wygant commanded only four votes. Absent more definitive guidance, however, we consider the requirement that state and local governments act only to correct their own past wrongdoing a persuasive and principled way to reconcile Wygant and Fullilove. Moreover, we find the distinction a compelling one. Experience reinforces Madison's observation that at the lower levels of government it becomes much more likely "that measures [will be] too often decided, not according to the rules of justice and the rights of the minor party, but by the superior force of an interested and overbearing majority." The Federalist No. 10, at 16; see also id. No. 51, at 163 (J. Madison) ("a coalition of a majority of the whole society could seldom take place on any other principles than those of justice and the general good"). As Justice Powell stated in Bakke, " [t]o hold otherwise would be to convert a remedy heretofore reserved for violations of legal rights into a privilege that all institutions throughout the Nation could grant at their pleasure to whatever groups are perceived as victims of societal discrimination." 438 U.S. at 310, 98 S. Ct. at 2758-59; see note 17 & p. 935 infra. "That is a step [the Court has] never approved." Id.; see also Wygant, 106 S. Ct. at 1854 (O'Connor, J., concurring) ("a governmental agency's interest in remedying 'societal' discrimination, that is, discrimination not traceable to its own actions, cannot be deemed sufficiently compelling to pass constitutional muster under strict scrutiny").

With these observations in mind, we examine the city's extensive findings in support of the ordinance.

ii. To its credit, the city did not act precipitously in adopting the ordinance. The record discloses a careful and deliberate effort to ascertain whether MBEs (as well as WBEs) had been the subject of invidious discrimination and, if so, what to do about it. The process started on December 13, 1982, when the Board of Supervisors adopted Resolution No. 952-82 "calling upon the Mayor to request [the Human Rights Commission] to hold public hearings to investigate the extent of minority and women business participation in City and County contracts." Human Rights Commission of San Francisco, Investigation Into Minority and Women Business Participation in City Contracting (October 1983) (HRC Rep.). Pursuant to this resolution, the HRC staff solicited information from the city's 56 departments, divisions and bureaus in an effort to develop a picture of their procurement practices. The Commission checked the responses for accuracy and completeness; it then issued press releases and bought several newspaper advertisements inviting input from anyone with additional views or information. Letters were sent to " [f]ourteen minority and women business associations ... [and] more than 750 companies and individuals, with names drawn from almost every available source." Id. at 6.

Over 40 witnesses testified during four days of hearings. Twenty witnesses submitted written statements. Id. at 6-7. No one who wanted to testify was turned away. Officials of some of the city's departments also testified and answered questions. Many witnesses advocated race-conscious affirmative action measures for MBEs; no one spoke out against them. Id. at 92-93. The Commission then analyzed and summarized this mass of information in a 172-page report to the Board of Supervisors. The Board conducted its own hearings and received further written reports. Only then did it pass the ordinance.

The city's procedures in considering and enacting the ordinance bespeak a careful and deliberate effort, one deserving the greatest deference consistent with our constitutional responsibility. At the same time, we are bound to scrutinize the ordinance closely and skeptically, as is appropriate whenever governmental action is challenged on the ground that it impairs personal liberties guaranteed by the constitution. "Racial and ethnic distinctions of any sort are inherently suspect and thus call for the most exacting judicial examination." Bakke, 438 U.S. at 291, 98 S. Ct. at 2748 (opinion of Powell, J.).

The city's thorough fact-finding process makes painfully clear what the city did not conclude in its findings. Most significantly, there is no finding of "prior discrimination by the governmental unit involved." Wygant, 106 S. Ct. at 1847 (plurality opinion).¹⁵  The findings discuss at some length such matters as the "historic discrimination against minorities and women, often officially sanctioned and enforced by government from the inception of our Republic to the present" and the "centuries of limited access to the marketplace" that these groups have suffered. Ordinance Secs. 12D.2(1), (2).

The findings also fault "the departments and awarding authorities of the city and county of San Francisco" for "functioning without specific uniform standards and criteria in the award of contracts and leases," noting that "minority-owned and women-owned businesses and other small local businesses are particularly disadvantaged" by this lack of uniform standards.¹⁶  Id. Sec. 2(7) (a) (c). But nowhere does the city intimate that there has been any discrimination against minorities by city officials or under color of the city's authority.¹⁷  Indeed, the only finding directly on point is that " [m]ost departments ... stated that the ethnicity of the contractor was unknown to them." HRC Rep. 106. Absent a finding of discrimination by city officials, "it cannot be said that the government has any greater interest in helping one individual than in refraining from harming another. Thus, the government has no compelling justification for inflicting such harm." Bakke, 438 U.S. at 308-09, 98 S. Ct. at 2757-58 (opinion of Powell, J.).¹⁸ 

While the absence of a finding of official discrimination is the ordinance's most significant shortcoming, there are other serious problems as well. Before the city "embarks on an affirmative action program, it [must have] convincing evidence that remedial action is warranted." Wygant, 106 S. Ct. at 1848 (plurality opinion). The Board relied heavily on statistics purportedly demonstrating the "virtual exclusion of minority-owned and women-owned businesses from City contracts." Ordinance Sec. 12D.2(7) (e). The statistics do not, however, bear out this assertion.¹⁹  For example, the findings note that " [MBEs] and [WBEs] combined received less than three percent (2.8 percent) of all prime contracts (exclusive of subcontracts) awarded during a base period of 1981 and 1982," id. Sec. .2(7) (d), "notwithstanding the fact that MBEs represent in excess of thirty-three percent (33%), and WBEs twenty-five percent (25%) of all San Francisco based firms." Id. Sec. .2(7) (e). While these numbers appear compelling, closer examination reveals flaws.

In the first place, the statistics seriously undercount minority (and women) participation in city contracting. As the ordinance recognizes elsewhere,²⁰  subcontracts account for a large portion of the city's contracting dollars. There is no finding--and we decline to assume--that male caucasian contractors will award contracts only to other male caucasians. If women-and minority-owned businesses are as prevalent as the city's findings suggest, such businesses may be earning a substantial portion of the city's contracting dollars by way of subcontracts. The curious exclusion of subcontracts in the city's findings²¹  leaves us, as it did the Board, without an accurate picture as to the extent of minority and women participation in the city's procurement process.²² 

In addition, the reference to 33 percent minority and 25 percent women enterprises in San Francisco is over-inclusive. These figures encompass a variety of businesses that do not provide goods or services subject to significant contracting by the city: ethnic restaurants, beauty parlors, newsstands and grocery stores, for example. The HRC Report in fact noted that " [a]vailability [of MBEs and WBEs] was difficult to assess accurately, as it is influenced by the number of firms which actually want to work for the City and also by the number of firms offering the kinds of services the City needs in any given year." HRC Rep. 98-99. Findings that would justify classifications based on race, potentially impairing the constitutional rights of those who are disadvantaged by them, must be drawn much more precisely and based upon more carefully selected and finely tuned data than those upon which the city relies here. See Wygant, 106 S. Ct. at 1848 (plurality opinion) (comparison between the racial composition of the staff and the racial composition of the student body is irrelevant); id. at 1857 (O'Connor, J., concurring); Edinger, 802 F.2d at 214-16 (statistical comparison must be with relevant groups, "not merely rely upon general population statistics").

Moreover, we note an inherent difference between Congress and the city, a difference that bears upon the findings on which they each may base remedial action. When Congress adopts a program such as that considered in Fullilove, it acts entirely with respect to persons within its jurisdiction because its power extends throughout the United States. The city has authority only over those within its borders; its actions, nevertheless, can have significant spillover effects. Here, for example, the city contracts with individuals and firms based outside San Francisco as imposition of the LBE preference acknowledges. When adopting race-conscious remedies that extend benefits and burdens beyond its territorial boundaries, the city is exercising authority with respect to individuals outside the scope of its legislative purview. If such authority can be sustained, it must be based on very specific findings that actions the city has taken in the past have visited racial discrimination on such individuals.

The findings upon which the ordinance is based do not address this issue; all of the data the city considered pertains to firms within San Francisco. See, e.g., Ordinance Sec. 12D.2(7) (e); HRC Rep. 101. That the city contracts with firms outside its borders seriously undercuts the basis for its conclusions. Contract awards should reflect the pool of available contractors, not the city's ethnic makeup. See note 17 supra; Edinger, 802 F.2d at 215.

Finally, the findings do not support the ordinance's sweeping definition of MBEs as those businesses owned or controlled by "ethnic persons of color including American Indians, Asians (including, but not limited to, Chinese, Japanese, Koreans, Pacific Islanders, Samoans, and Southeast Asians), Blacks, Filipinos and Hispanics." Ordinance Sec. 12D.5. The ordinance and the Human Rights Commission report contains no evidence whatsoever--much less particularized findings--supporting the proposition that each of the listed ethnic groups included in this categorization has been the subject of discrimination.²³  Like the Wygant plurality, 106 S. Ct. at 1852 n. 13, we are unable to uphold such a broad classification of who qualifies as a minority for purposes of the city's remedial affirmative action program. See also Bakke, 438 U.S. at 309 n. 45, 98 S. Ct. at 2758 n. 45 (opinion of Powell, J.) (inclusion of Asians in special admissions group is "especially curious" in light of substantial number of Asians admitted through regular admissions process). "Preferring members of any one group for no reason other than race or ethnic origin is discrimination for its own sake. This the Constitution forbids." Id. at 307, 98 S. Ct. at 2757.

Even if the findings were adequate to support some race-conscious remedies, we would have to consider whether the means adopted by the ordinance are appropriate to that end. Race-conscious distinctions must be narrowly tailored to eliminate the consequences of past discrimination. See Bakke, 438 U.S. at 299, 98 S. Ct. at 2752-53 (opinion of Powell, J.); Paradise, --- U.S. at ----, 107 S. Ct. at 1066-74 (plurality opinion), at ----, 107 S. Ct. at 1080 (O'Connor, J., dissenting); Wygant, 106 S. Ct. at 1850 (plurality opinion); Fullilove, 448 U.S. at 484, 100 S. Ct. at 2777-78 (opinion of Burger, C.J.); In re Griffiths, 413 U.S. 717, 721-22, 93 S. Ct. 2851, 2854-55, 37 L. Ed. 2d 910 (1973). "Racial classifications are simply too pernicious to permit any but the most exact connection between justification and classification." Fullilove, 448 U.S. at 537, 100 S. Ct. at 2805 (Stevens, J., dissenting). This means that the classification adopted must " 'fit' with greater precision than any alternative means." Wygant, 106 S. Ct. at 1850 n. 6 (plurality opinion) (citing Ely, The Constitutionality of Reverse Racial Discrimination, 41 U. Chi. L. Rev. 723, 727 n. 26 (1974)).

In addition, the remedial program must not impose a disproportionate burden upon few individuals. See Ohio Contractors Ass'n, 713 F.2d at 173 (burden must be "reasonable"). In upholding the program in Fullilove, the plurality opinion noted as follows:

The actual "burden" shouldered by non-minority firms is relatively light in this connection when we consider the scope of the public works program compared with overall construction contracting opportunities.⁷²

72. The Court of Appeals relied upon Department of Commerce statistics to calculate that the $4.2 billion in federal grants conditioned upon compliance with the MBE provision amounted to about 2.5% of the total of nearly $170 billion spent on construction in the United States during 1977. Thus, the 10% minimum minority business participation contemplated by this program would account for only 0.25% of the annual expenditure for construction work in the United States. Fullilove v. Kreps, 584 F.2d at 607.

448 U.S. at 484-85 and n. 72, 100 S. Ct. at 2777-78 & n. 72, see also id. at 514-15, 100 S. Ct. at 2793-94 (Powell, J., concurring). In striking down the remedial measures in Wygant, the plurality noted this aspect of Fullilove, 106 S. Ct. at 1850-51, finding that the burden imposed by the Jackson school board's program fell squarely upon "Wendy Wygant and other individuals who claim that they were fired from their jobs because of their race." Id. at 1850 n. 8. In upholding the district court's remedial order in Paradise, a plurality of the Justices felt that the decree "did not impose an unacceptable burden on innocent third parties." Paradise, --- U.S. at ----, 107 S. Ct. at 1073 (plurality opinion); id. at ----, 107 S. Ct. at 1076 (" [t]he effect of the order on innocent white troopers is likely to be relatively diffuse") (Powell, J., concurring).²⁴ 

The requirement that the remedial program be drawn so as to avoid a disproportionately large burden on an individual or group of individuals is inherent in the equal protection clause. As the Court has noted, "rights created by the first section of the Fourteenth Amendment are, by its terms, guaranteed to the individual. The rights established are personal rights." Shelley v. Kraemer, 334 U.S. 1, 22, 68 S. Ct. 836, 846-47, 92 L. Ed. 1161 (1948). The more severely the burden of governmental action falls upon an individual or an identified group singled out on account of race, the more appropriate it becomes for a court to intercede to assure "that the burden ... is precisely tailored to serve a compelling governmental interest. The Constitution guarantees that right to every person regardless of his background." Bakke, 438 U.S. at 299, 98 S. Ct. at 2753 (opinion of Powell, J.).

Because the ordinance casts such a wide net,²⁵  it is difficult to tell whether the burden it imposes is broadly shared as in Fullilove and Paradise, or concentrated as in Wygant. Fullilove, Wygant and Paradise dealt with discrete activities; the Court there could determine who would be likely to bear the burdens and how such burdens would be distributed. The ordinance here covers a much broader range of activities: whatever the city acquires by purchase or contract. This includes everything from construction and consulting to interpreting and book binding. HRC Rep. 49, 56, 60-61.²⁶  Depending on the industry in question, the degree of minority participation, and the extent to which the city's patronage amounts to a significant share of the market for the particular good or service, the burden imposed by the ordinance will vary.²⁷  In an industry where city procurement is negligible or MBEs make up a relatively small portion of the market, the burden occasioned by giving MBEs a preference will be spread broadly and lightly. By contrast, a non-MBE business in an industry heavily dependent upon city procurement where MBEs have a significant share of the market may well be destroyed.²⁸  Nothing in the ordinance prevents this from happening. Yet, given the ordinance's breadth, there is a significant risk that it may.

This concern is properly considered in the context of a facial challenge because the ordinance lacks adequate administrative mechanisms to prevent or ameliorate such potentially harsh results. The existence of appropriate administrative remedies played a pivotal role in the plurality's opinion in Fullilove. See 448 U.S. at 486-89, 100 S. Ct. at 2778-80. The plurality there noted:

Even in the context of a facial challenge such as is presented in this case, the MBE provision cannot pass muster unless, with due account for its administrative program, it provides a reasonable assurance that application of racial or ethnic criteria will be limited to accomplishing the remedial objectives of Congress and that misapplications of the program will be promptly and adequately remedied administratively.

Id. at 487, 100 S. Ct. at 2779. In determining the adequacy of the available administrative remedies the plurality noted that the procedures could be used to rebut

[t]wo fundamental congressional assumptions [that] underlie the MBE program: (1) that the present effects of past discrimination have impaired the competitive position of businesses owned and controlled by members of minority groups; and (2) that affirmative efforts to eliminate barriers to minority-firm access, and to evaluate bids with adjustment for the present effects of past discrimination, would assure that at least 10% of the federal funds granted under the Public Works Employment Act of 1977 would be accounted for by contracts with available, qualified, bona fide minority business enterprises.

Id.

The Fullilove plurality also thought it significant that administrative procedures were available "to avoid dealing with an MBE who is attempting to exploit the remedial aspects of the program by charging an unreasonable price, i.e., a price not attributable to the present effects of past discrimination," id. at 488, 100 S. Ct. at 2780, that these procedures give grantees "the opportunity to demonstrate that their best efforts will not succeed or have not succeeded in achieving the statutory 10% target for minority firm participation within the limitations of the program's remedial objectives," id.; that " [t]he administrative complaint mechanism allows for grievances of prime contractors who assert that a grantee has failed to seek a waiver in an appropriate case," id. at 489, 100 S. Ct. at 2780, and that "the use of racial and ethnic criteria is premised on assumptions rebuttable in the administrative process giv [ing] reasonable assurance that application of the MBE program will be limited to accomplishing the remedial objectives contemplated by Congress and that misapplications of the racial and ethnic criteria can be remedied." Id.

While the San Francisco ordinance provides some administrative procedures,²⁹  they do not have the scope or breadth of those discussed in such detail in Fullilove. Aggrieved contractors have no mechanism for asserting that the ordinance's fundamental premises are inapplicable to their industry; that the ordinance will have a harsh and disproportionate impact upon them far exceeding the sharing of the burden approved in Fullilove; or that the ordinance is, in particular instances, operating not to eradicate the effects of past discrimination, but to give a windfall to an MBE "who is attempting to exploit the remedial aspects of the program." 448 U.S. at 488, 100 S. Ct. at 2780. We read Fullilove, particularly in light of Wygant, as requiring concrete assurances that harsh and disproportionate effects upon particular contractors will be considered and corrected by individualized administrative procedures.³⁰  This appears to be entirely lacking in the ordinance before us.³¹ 

We also conclude that, on the basis of the record it had compiled, the city was not justified in turning to such drastic remedies as bid preferences and set-asides, at least not in the first instance.³²  We must give "particularly intense scrutiny to whether a nonracial approach or a more narrowly tailored racial classification" could remedy the limited participation of minorities in the contracting process. Wygant, 106 S. Ct. at 1850 n. 6 (plurality opinion) (quoting Greenawalt, Judicial Scrutiny of "Benign" Racial Preference in Law School Admissions, 75 Colum. L. Rev. 559, 578-79 (1975)). The findings on which the ordinance is based disclose a variety of causes for the limited minority participation in the city's procurement process: the lack of uniform criteria for contracting with the city's departments, Ordinance Sec. 12D.2(7) (a); excessive bonding and insurance requirements "often unrelated to actual performance," id. Sec. .2(7) (1); and lack of notice of potential contract awards due to limited advertising and outreach, id. Sec. .2(7) (k).³³ 

Each of these problems was capable of a direct, specific response, having far less dramatic effects on individual rights than the remedies actually adopted.³⁴  Thus, the city could have attempted to correct the lack of uniform policies by adopting procurement guidelines and limiting the scope of departmental discretion. The arbitrary imposition of bonding and insurance requirements could have been eliminated by revising insurance and bonding policies to bring them into conformity with the city's needs. The lack of notice and outreach could have been remedied by increasing the resources devoted to advertising procurement opportunities to groups the city believes are underrepresented in the procurement process. Moreover, it would have been entirely permissible for the city to provide educational programs to acquaint minority and other businesses with city contracting opportunities and the procedures required for preparing and submitting bids.³⁵ 

We do not hold that the city is forever limited to such moderate remedial measures. We do read the admonition that only a "limited and properly tailored remedy" may be adopted, Fullilove, 448 U.S. at 484, 100 S. Ct. at 2778 (opinion of Burger, C.J.), as requiring exhaustion of more neutral measures before resorting to race-conscious ones.³⁶  That is what happened in Fullilove. Before passing the statute there in issue the federal government had tried less sweeping remedies only to see them fail. Id. at 466-67, 100 S. Ct. at 2768-69.³⁷  In attempting to protect and reconcile the sometimes conflicting rights and interests of all its citizens, the city must do no less.

Laws that afford special privileges to women raise some of the most difficult and sensitive questions about the permissible bounds of governmental action within the confines of the equal protection clause. The mid-level review that the Court has applied to such classifications provides "relatively little guidance in individual cases." Madisonian Interpretation, 91 Yale L.J. at 1412.³⁸  The relevant considerations are numerous and complex.

As the San Francisco City Council found, women have suffered disparate treatment in the area of business and employment. Some of this may be due to the fact that women, as child-bearers, suffer career disruptions to which men are much less subject. However, many of the disadvantages women have suffered result from stereotypes concerning their proper roles and abilities.³⁹  Only recently have women begun to assume their rightful place in business and the professions.⁴⁰ 

As the Court has recognized, government may lawfully promote this progress. See, e.g., Schlesinger v. Ballard, 419 U.S. 498, 508, 95 S. Ct. 572, 577-78, 42 L. Ed. 2d 610 (1975) (women officers given additional time to achieve promotion because they are barred from combat duty and therefore do not have the same promotional opportunities as do men); Califano v. Webster, 430 U.S. 313, 318, 97 S. Ct. 1192, 1195, 51 L. Ed. 2d 360 (1977) (because the market is inhospitable to women seeking higher paying jobs, their retirement benefits may be computed by a more generous formula than that applicable to men). Government has the broad power to assure that physical differences between men and women are not translated into permanent handicaps, and that they do not serve as a subterfuge for those who would exclude women from participating fully in our economic system.

But there are dangers. A thin line divides governmental actions that help correct the effects of invidious discrimination from those that reinforce the harmful notion that women need help because they can't make it on their own. It is in part for this reason that the Court has required an "exceedingly persuasive justification" for classifications based on gender. Mississippi Univ. for Women v. Hogan, 458 U.S. 718, 724, 102 S. Ct. 3331, 3336, 73 L. Ed. 2d 1090 (1982); Kirchberg v. Feenstra, 450 U.S. 455, 461, 101 S. Ct. 1195, 1199, 67 L. Ed. 2d 428 (1981); Personnel Admin. of Mass. v. Feeney, 442 U.S. 256, 273, 99 S. Ct. 2282, 2293, 60 L. Ed. 2d 870 (1979). While helping women overcome the adverse effects of discrimination is a sufficiently important objective to justify the limited use of gender-based classifications, "the mere recitation of a benign, compensatory purpose is not an automatic shield which protects against any inquiry into the actual purposes underlying a statutory scheme." Weinberger v. Wiesenfeld, 420 U.S. 636, 648, 95 S. Ct. 1225, 1233, 43 L. Ed. 2d 514 (1975). The city may invoke a compensatory purpose to justify a discriminatory classification "only if members of the gender benefited by the classification actually suffer a disadvantage related to the classification." Id. Moreover, the classification must not reflect or reinforce archaic and stereotyped notions of the roles and abilities of women. 458 U.S. at 724-25, 102 S. Ct. at 3336.

The San Francisco ordinance seeks to compensate women for the disparate treatment they have suffered in the business community and for the bureaucratic inertia in the city's contracting procedures that has perpetuated the disadvantages flowing from that treatment. The ordinance states that women have been subjected to "historical discrimination" that has had "a serious, negative impact on their ability to participate fully and equitably in our society," Ordinance Sec. 12D.2(1), and that they have suffered "centuries of limited access to the marketplace ... because of the failure of local government [ ] ... to remedy overt and subtle discrimination." Id. Sec. .2(2). The ordinance recognizes the disadvantages women suffer because of the city's lack of uniform standards and excessive departmental discretion in awarding contracts; the disproportionate burden they must bear because of excessive bonding and insurance requirements; and the reduced access to city contracts they have because of limited advertising. See id. Sec. .2(7).

The ordinance seeks to remedy these hardships by giving women an advantage in securing contracts with the city. While this objective is plainly an important and legitimate one, we think it a much closer question whether the means employed are "substantially related to [its] achievement." Wengler v. Druggists Mut. Ins. Co., 446 U.S. 142, 150, 100 S. Ct. 1540, 1545, 64 L. Ed. 2d 107 (1980). The ordinance is unusual in the breadth of the subsidy it gives women. Earlier cases, for the most part, considered relatively narrow remedies directed at relatively specific areas of disadvantage, see, e.g., Schlesinger v. Ballard, 419 U.S. 498, 95 S. Ct. 572, 42 L. Ed. 2d 610 (1975) (opportunities for promotion in armed forces); Michael M. v. Superior Court, 450 U.S. 464, 101 S. Ct. 1200, 67 L. Ed. 2d 437 (1981) (statutory rape statute that applied only to males in order to protect women); Clark v. Arizona Interscholastic Ass'n, 695 F.2d 1126 (9th Cir. 1982) (policy of sponsoring interscholastic volleyball teams exclusively for girls), cert. denied 464 U.S. 818, 104 S. Ct. 79, 78 L. Ed. 2d 90 (1983). By contrast, the San Francisco ordinance gives women an advantage in a large number of businesses and professions. We have no reason to believe that women are disadvantaged in each of the many different industries covered by the ordinance. Experience teaches the contrary. See Hogan, 458 U.S. at 729, 102 S. Ct. at 3338-39 ("Mississippi has made no showing that women lacked opportunities to obtain training in the field of nursing or to attain positions of leadership in that field").⁴¹ 

Moreover, preferences as broad as these can reinforce harmful stereotypes. See Bakke, 438 U.S. at 298, 98 S. Ct. at 2752 ("preferential programs may only reinforce common stereotypes holding that certain groups are unable to achieve success without special protection") (opinion of Powell, J.). This risk is magnified where the preferences are not accompanied by particularized findings of harm, and where they extend to areas where women have not been found to be disadvantaged. The notion that women need help in every business and profession is as pernicious and offensive as its converse, that women ought to be excluded from all enterprises because their place is in the home. See note 39 supra.

Although we find the city's WBE preference troubling, we uphold it against the challenge presented in this case. While the city's program may well be overinclusive, we believe it hews closely enough to the city's goal of compensating women for disadvantages they have suffered so as to survive a facial challenge. Unlike racial classifications, which must be "narrowly" tailored to the government's objective, e.g., Wygant, 106 S. Ct. at 1850 (plurality opinion); Fullilove, 448 U.S. at 480, 100 S. Ct. at 2775-76 (opinion of Burger, C.J.), there is no requirement that gender-based statutes be "drawn as precisely as [they] might have been." Michael M., 450 U.S. at 473, 101 S. Ct. at 1206 (1980) (plurality opinion). Although the city's program may extend preferences to some fields where women are not disadvantaged, experience suggests that these are still the exceptions. See generally Professional Women & Minorities, supra note 36, at 54-265. In most fields, the requirement that the gender benefited "actually suffer a disadvantage related to the classification" will be satisfied. Hogan, 458 U.S. at 728, 102 S. Ct. at 3338. The WBE program is therefore substantially related to the city's important goal of compensating women for the disparate treatment they have suffered in the marketplace. Id. at 724, 102 S. Ct. at 3336.

We may reach a different conclusion if and when the WBE preferences are challenged as applied to an industry where women are not disadvantaged. While governmental action, particularly where it is plainly remedial in character, need not operate with surgical precision, there must be strong assurances that it is not merely the result of patronizing assumptions about the status and abilities of women, but an attempt to provide assistance where it is needed and warranted. The city may not close its eyes to the rich texture of our economic landscape and ignore the very real differences in the status of women in various businesses and professions, see note 41 supra; nor may it ignore the substantial progress women have made and continue to make in business and the professions. See note 40 supra.

As the ordinance found, fully 25 percent of businesses within the City of San Francisco are owned by women and 45 percent of the civilian work force is female. Ordinance Secs. 12D.2(7) (e), 12D.2(3). These numbers may not be distributed homogeneously and, in some industries, women may have reached or exceeded parity with men. It is unlikely that the city could demonstrate an "exceedingly persuasive justification" for giving women a preference in such industries. Equally important, in some industries the participation of women may be so high that encouraging further participation may well reinforce harmful stereotypes, defeating, rather than promoting, the cause of gender equality. See Hogan, 458 U.S. at 729, 102 S. Ct. at 3338-39 (" [r]ather than compensate for discriminatory barriers faced by women, [Mississippi's] policy of excluding males from admission to the School of Nursing tends to perpetuate the stereotyped view of nursing as an exclusively woman's job"). We leave these matters to another day. We note only that such challenges, if raised, are not precluded by our decision today.

Appellants' final contention is that the ordinance's LBE preferences are unconstitutional because they seek to promote domestic businesses at the expense of nonresident competitors. The only precedent they cite is Metropolitan Life Insurance Co. v. Ward, 470 U.S. 869, 105 S. Ct. 1676, 84 L. Ed. 2d 751 (1985). Metropolitan considered an Alabama statute that placed a heavier tax burden on premiums collected by out-of-state insurance companies than those collected by insurance companies incorporated within the state. The state argued that this statute served legitimate purposes: (1) encouraging the formation of new insurance companies within the State; and (2) promoting capital investment in certain state assets and securities. Id. at 873, 105 S. Ct. at 1679. The Court struck down the provision, holding that these purposes could not be advanced by burdening foreign businesses competing with domestic ones.⁴²  What seemed to trouble the Court was that the Alabama tax had no other function than to give domestic businesses an advantage over their foreign competitors. The Court noted:A State's natural inclination frequently would be to prefer domestic businesses over foreign. If we accept the State's view here, then any discriminatory tax would be valid if the State could show it reasonably was intended to benefit domestic business.

Id. at 882, 105 S. Ct. at 1683-84 (footnote omitted).

The LBE preference in the San Francisco ordinance is readily distinguishable from Alabama's premium tax struck down in Metropolitan. Unlike the statute in Metropolitan, the ordinance in this case affects only the expenditure of public funds. The city's power to spend its funds as it pleases is not limitless, as the previous portions of this opinion demonstrate. However, the city may rationally allocate its own funds to ameliorate disadvantages suffered by local business, particularly where the city itself creates some of the disadvantages.⁴³ 

In addition, the LBE preference is not a burden imposed "discriminatorily ... on nonresident corporations solely because they are nonresidents," id. at 882 n. 10, 105 S. Ct. at 1684 n. 10, it is an attempt to remove or to lighten a burden San Francisco businesses must bear that is not shared by others. While the distinction is a fine one, and our ruling should not be read as granting constitutional immunity to all local preferences so long as they can be characterized in this fashion, we believe that the combination of ends and means employed by the city here falls well within the discretion permitted to it under the equal protection clause.

Two of the ordinance's findings are relevant to this issue. The first notes that "local businesses which seek to enter into contracts with the City and County of San Francisco are at a competitive disadvantage with businesses from other areas because of the higher administrative costs of doing business in the City (e.g. higher taxes, higher rents, higher wages and benefits for labor, higher insurance rates, etc.)." Ordinance Sec. 12D.2(4). The second is that "the public interest would best be served by encouraging businesses to locate and remain in San Francisco through the provision of a minimal 'good faith' preference to local businesses in the awarding of City contracts." Id. Sec. .2(5). Both of these are legitimate considerations. And, as the Supreme Court has recognized, it is generally legitimate for a governmental entity to encourage businesses to move into the jurisdiction. Metropolitan, 470 U.S. at 879, 105 S. Ct. at 1682, Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 532-33, 79 S. Ct. 437, 443-44, 3 L. Ed. 2d 480 (1959) (Brennan, J., concurring).

As Metropolitan demonstrates, however, seemingly legitimate ends are tainted if they are pursued by illegitimate or excessive means. Here the means adopted are both measured and appropriate. The preferences given local businesses are relatively slight. LBEs get only a 5 percent bidding preference; there are no goals, quotas or set-asides. Moreover, the preference does not apply to all business transactions conducted within the jurisdiction, only those where the city itself is a party. Finally, the definition of LBE is rather broad;⁴⁴  foreign businesses can become LBEs by acquiring "fixed offices or distribution points" within the city and paying their permit and license fees from a San Francisco business address. Thus, any business willing to share some of the burdens of a San Francisco location--higher rents, wages, insurance premiums, etc.can enjoy the benefits of the LBE preference. We see no constitutional infirmity in the city's modest attempt to support local businesses and to induce other businesses to move there.

Conclusion

We hold as follows:

(1) With respect to contracts over $50,000, all of the ordinance's preferences are invalid insofar as they would result in the award of contracts to other than the "lowest reliable and responsible bidder." However, the LBE preference is valid as to any contracts covered by San Francisco Charter section 7.204.

(2) With respect to contracts of $50,000 or less: (a) those provisions of the ordinance giving preferences to MBEs are void as violating the equal protection clause; (b) those provisions giving preferences to WBEs are facially valid but subject to further challenge as applied to particular contracts and industries; and (c) all other portions of the ordinance, in particular the 5 percent bid preference given to LBEs, are valid.

We remand to the district court for entry of a decree in accordance with this opinion.