On the surface, the U.S. Supreme Court’s June 29th decision to end race-based admission practices at colleges and universities may seem far removed from the day-to-day operations of your architecture or engineering firm. However, a closer look at the decision shows that the impact on the architecture/engineering/construction (A/E/C) business landscape could actually be significant and widespread.

In a recent conversation with PSMJ President Gregory Hart on The $10,000 Hour broadcast for PSMJ PRO members, PSMJ Senior Consultant Shyam Rajadhyaksha laid out the impact that this will have on minority-owned and other disadvantaged business enterprise organizations. ”A key issue that has received little attention is that this court decision will be used as the basis to make most race- and gender-based supplier diversity programs illegal,” stated Rajadhyaksha. “Because the court case applies to Harvard University, a private institution, future court cases will interpret that this ruling applies to privately-owned companies, not just privately-owned universities.”

For more than forty years, most major public infrastructure projects have had a small business and/or diverse business requirement. For many diverse-owned businesses, these set-aside markets comprise a majority of their revenue. With the potential end of these programs, a large portion of these businesses will face major revenue disruption as prime engineering firms may be reluctant to hire minority-owned sub-consultants when they can perform the services and retain the profits using in-house resources. 

“To be sure, there will be some court challenges, but A/E/C firms could start seeing the impact of this as soon as in the next 2-3 years. We also need to watch how the impacts could spread beyond supplier diversity programs. It is certainly possible that this decision may bring legal scrutiny to certain recruiting programs that target underrepresented communities.” continued Rajadhyaksha.

Now is a critical time to assess the impact that this court decision could have on your firm and answer strategic questions such as:
•If we lose set-aside revenue, what is our business development plan to replace that lost revenue?
•If we lose set-aside revenue, how will that impact our firm’s valuation?
•If we lose set-aside revenue, how will this impact our firm’s ownership transition plan?
•Is this a good time to make an acquisition to offset lost set-aside revenue?
•Will this make our firm a more attractive acquisition candidate for buyers looking to add talent capacity?
•How can we preserve our DEI initiatives and progress in light of this court decision?

To learn more about the impact of this court decision on the A/E/C industry or to learn how you can take action to safeguard your firm’s growth plan, contact PSMJ Senior Consultant Shyam Rajadhyaksha at sraj@psmj.com.