Adarand Construction Inc. V. Pena (1995)

Procedure: It was upheld in the District Court and the Circuit Court of Appeals but was overturned by the Supreme Court.

Facts: Adarand, a contractor specializing in highway guardrail work, submitted the lowest bid as a subcontractor for part of a project funded by the United States Department of Transportation. Most federal agency contracts must contain a subcontractor compensation clause, which gives a prime contractor a financial incentive to hire subcontractors certified as small businesses controlled by socially and economically disadvantaged individuals, and requires the contractor to presume that such individuals include minorities or any other individuals found to be disadvantaged by the Small Business Administration (SBA). Adarand was not a certified business as a small disadvantage business.

Issue: Adarand filed suit against respondent federal officials, claiming that the race-based presumptions used in subcontractor compensation clauses violate the equal protection component of the Fifth Amendment's Due Process Clause.

Decision: The Court held that all racial classifications, whether imposed by federal, state, or local authorities, must pass strict scrutiny review. In other words, they "must serve a compelling government interest, and must be narrowly tailored to further that interest." The Court added that compensation programs which are truly based on disadvantage, rather than race, would be evaluated under lower equal protection standards. However, since race is not a sufficient condition for a presumption of disadvantage and the award of favored treatment, all race-based classifications must be judged under the strict scrutiny standard.

Dissent: Justice Stevens, Ginsburg, Souter & Breyer all write separate dissenting opinions.