Lawsuit challenges Wisconsin Supplier Diversity Program

A lawsuit has been filed challenging the state’s Supplier Diversity Program, alleging that the program is unconstitutional.

On July 8, a Milwaukee-based group called Citizens Defending Liberty filed a lawsuit against Gov. Tony Evers and Wisconsin Department of Administration Secretary Kathy Blumenfeld in the Waukesha County Circuit Court in Citizens Defending Liberty v. Evers.

The Wisconsin Institute for Law & Liberty, a Milwaukee-based litigation and policy group, is representing the plaintiff challenging the Supplier Diversity Program. The case was assigned to Waukesha County Circuit Court Judge Paul Bugenhagen Jr. A hearing date hasn’t been set yet.

According to the DOA’s website, the program certifies businesses owned by minorities, women and disabled veterans and sets a goal for the state to spend 5% of its procurement dollars with certified minority-owned businesses when working on state agency or Universities of Wisconsin projects.

The program verifies that minority-owned businesses are at least 51% owned, managed and controlled by a member or members of a population, including Native American, Black and Hispanic.

The program also has a 1% goal for disabled veteran-owned businesses, and certified DVB businesses may receive a permissive 5% bid preference when they bid on state contracts.

Wisconsin is a state that awards contractors to the lowest bidder. Suppliers must bid on projects to get state contracts, unless they are a “Best Judgement” bid with a cost of $5,000 or less or the only viable supplier.

Complaint alleges supplier program is unconstitutional

The lawsuit argues that the Supplier Diversity Program violates the Equal Protection Clause of the 14^th Amendment, according to the complaint.

Dan Lennington, the managing vice president and deputy counsel of WILL, said the program discriminates based on race, by giving a 5% bonus to all nonwhite contractors when they bid on contracts with the state of Wisconsin.

The lawsuit argues that the state discriminated against groups of people who weren’t included certified minority groups listed by the DOA, including people who are white, people from East Asia and in the Middle East.

“(Minority-owned business enterprises) that submit bids are treated as though their total bid is 5% less than the actual bid, creating an unlevel playing field and inflating the costs of goods and services by discriminating against non-MBE firms,” plaintiff wrote.

The plaintiff asked for a permanent injunction stopping the state from enforcing the Supplier Diversity Program based on race, ethnicity or national origin. They also asked for a declaratory judgment that goals based on race or ethnicity be declared unconstitutional and the defendants pay for attorneys’ fees.

Diverse suppliers, both MBEs and DVBs, made up more than $265 million of the nearly $3.8 billion the state spent on procurement, facilities construction, architecture and engineering, and state highway services in fiscal year 2024, a DOA report showed. Diverse supplier purchases made up 7.17% of total spending.

“Our goal is to make sure that all these programs are open to all businesses, and the taxpayers benefit when there’s a level playing field,” Lennington said. “Because the bidder with the lowest bid wins the contract, and that’s not going on right now.”

A spokesperson for the Wisconsin Department of Administration said the agency cannot comment on pending litigation.

In February, WILL filed a federal complaint against New York and Wisconsin on behalf of a group called Contractors for Equal Opportunity.

The lawsuit was filed against the New York Department of Economic Development’s Minority and Women-Owned Business Enterprise Program and DOA’s Supplier Diversity Program. The plaintiff argues that these programs are operating in violation of Title VI as part of the Civil Rights Act of 1964.

Trump administration expands DEI restrictions

In March, President Donald Trump signed an executive order requiring federal agencies to prohibit diversity, equity and inclusion practices by contractors and subcontractors.

Agencies had a 30-day deadline to add the contract clause and obligations flowed down to subcontractors at each tier, according to Chicago-based law firm DLA Piper. It also exposed contractors to liability from the False Claims Act.

The order is enforced by the White House’s Office of Management and Budget and the U.S. Department of Justice, according to DLA Piper.

The next significant deadline is July 24, when each federal agency leader must review implementation of the clause and report their compliance.

In June, attorneys general of 19 states, including Wisconsin, and Washington D.C. filed a lawsuit alleging that federal agencies broke the law when they implemented the federal order.

The lawsuit argues dozens of federal agencies added new terms barring DEI activities with lack of notice or explanation.

“The definitions of ‘racially discriminatory DEI activities’ and ‘program participation’ provided in the Executive Order and adopted by the agencies are unclear and fail to provide sufficient guidance either to contractors or federal contracting officers regarding what particular activities are prohibited,” plaintiffs wrote.