S.C. moves to kill ‘DEI’ contracting before federal funding cut-off

The state of South Carolina and its largest city took dramatic steps this week to begin dismantling decades-old programs designed to increase participation by women- and-minority-owned businesses in government contracting.

The moves came in response to a series of Trump administration directives aimed at eliminating diversity, equity and inclusion (DEI) initiatives at every level of government. In his 2024 campaign, President Donald Trump vowed to end what he termed “very unfair laws” arising from “anti-White feeling” in the country.

Trump supporters, including S.C. Gov. Henry McMaster, have characterized laws calling for specific levels of women and minority participation in contracts as “a racial spoils system.” Opponents say they’re a necessary remedy for previous, and ongoing, discrimination.

State and local governments that refuse to comply with the Trump administration directives stand to lose billions of dollars in federal assistance, as state and Charleston officials stressed when explaining their actions.

‘Constitutional requirement’ or an ‘assault on women’?

Gov. Henry McMaster began the state’s compliance process with a Dec. 3 executive order directing agencies to stop following state laws that set targets for women and minority participation in state contracting.

In comments to reporters, McMaster argued the action was a necessary response to recent court orders calling the legality of such programs into question, as well as a Jan. 21 Trump executive order that called DEI “pernicious discrimination” that violates the law.

“If we didn’t abide, then our people would be subject to losing federal money,” he said. “In all likelihood, those funds would not flow with these restrictions in our procurement law.”

Specifically, McMaster pointed to two laws he called “unconstitutional and discriminatory” — one that requires all departments to report regularly on progress toward a goal of 10% women and minority contracting, and another that directs the S.C. Department of Transportation to hit a 5% participation rate.

But critics like state Rep. Jermaine Johnson, an announced Democratic candidate for governor from Richland County, note the programs targeted by McMaster’s order open up contracting opportunities for a majority of South Carolinians — in particular women, who represent 51% of the state’s population.

“We all know that a lot of these contracts are male dominated, and we’re going to take opportunities away from women?” he told Statehouse Report on Dec. 4. “That’s just wrong, especially in a state where women are still being underpaid, and still almost being treated like second-class citizens.”

League of Women Voters of S.C. Vice President Lynn Teague expanded on those concerns.

“Women will suffer from this,” Teague said. “We see it as part of an attack on the rights of women from every direction, including efforts to pass draconian abortion bans and attacks on the professional status of jobs that are dominated by women.”

‘A confusing time’ in Charleston

Meanwhile on Dec. 2 in Charleston, , Mayor William Cogswell and city council gave initial approval to an ordinance ending the city’s women- and minority-contracting program, altering policies at its small business incubator, and changing the names of several departments and committees, removing all references to race.

The moves were necessary, Cogswell said, to meet a year-end Trump deadline that threatens $100 million in federal grants that the city relies on.

Despite concerns voiced by several members, the lone dissenting vote was cast by long-time Councilman Dudley Gregorie, who asked Cogswell and City Attorney Julia Copeland whether the Trump administration had clearly defined DEI at any point in its executive orders or communications with the city.

After learning the answer was no, Gregorie questioned how the city could know if its actions would bring it into compliance.

“The federal government or the state at a minimum owes us that explanation,” he said. “We still could have programs they could find and say, ‘This is a DEI program. You’re not in compliance, Charleston, and we’re going to hold up all your money.’”

What’s more, Gregorie said, the lack of a clear definition had led the city to focus its compliance efforts on some diversity programs, mostly race-based, while ignoring others.

“I just want everyone to know, we’re not going back,” Gregorie said. “We’re not sitting on the back of the bus anymore. And that’s where this is headed.”

Cogswell acknowledged those concerns and others, noting that the language would probably be amended before final passage.

“It’s a confusing time,” he said.

Looking forward

In a Dec. 3 release, leaders in the S.C. House and Senate said they were ready to codify the governor’s order with legislation next year.

“I am confident my colleagues in the Senate share my belief that state government must reflect equality under the law in all its endeavors and ensure our statutes fully comply with the Constitution,” said Senate President Thomas Alexander, R-Oconee.

S.C. House Speaker Murrell Smith, R-Sumter, added, “Discrimination is wrong, and its misguided use as a remedy is worse. The House will address this when we return in January.”

But in comments to Statehouse Report, some legislators and business advocates were already looking past what they see as the inevitable repeal of these laws to ask, What comes next?

Specifically, they said, they want to know how lawmakers will continue to invest in women and minority entrepreneurs — and just as important, how they plan to keep the state’s contracting process from devolving back into a good-ole-boy system.

“Look at our rural areas we want to see thriving,” said Frank Knapp, president of the Small Business Chamber of Commerce. “It’s minority small businesses that can do that. And that’s an investment the state ought to be involved with.”

Charleston Democratic Sen. Deon Tedder said he shared those concerns, noting the state needs to support its home-grown businesses with a contracting process that gives everyone a real opportunity.

To that end, he said, he thinks it’s time for the state to adopt dramatically enhanced transparency laws requiring full disclosure of how and why every contract is awarded.

“I don’t have an issue with true merit-based competition, but we need to make sure it’s really on the merits, and not just because you know somebody who knows somebody,” Tedder said. “That’s already going on, and if we’re not careful this will just make it worse.”