August 21, 2023
The U.S. Small Business Administration (SBA) is suspending the submission of new applications for its 8(a) business development program, following a ruling by a district judge in the U.S. Eastern District Court. You will be asked to explain why you are eligible to participate in the program. The District of Tennessee found that the SBA's use of a “rebuttable presumption” of social disadvantage against certain minority groups in determining eligibility for the program violates the Federal Contractor's Constitutional Amendment to Equal Protection. It was held that the rights under Article 5 were infringed.
The court order is Ultima Services Corp. v. U.S. Department of Agriculture This prevents the SBA, and the United States Department of Agriculture (USDA), from using “rebuttable presumptions” when administering the 8(a) program.
SBA 8(A) Business Development Program
The SBA's 8(a) Business Development Program was designed to help certain small and disadvantaged businesses compete in the U.S. federal marketplace. To qualify for the program, current regulations require companies to demonstrate that they are at least 51% owned and controlled by socially and economically disadvantaged U.S. citizens. Certain groups specifically identified by the SBA, such as “Black Americans,” “Hispanic Americans,” “Native Americans,” “Asian Pacific Americans,” and “Subcontinental Asian Americans,” are considered socially disadvantaged. There is a “rebuttable presumption'' that the person is in a position of
An individual who is not a member of a specifically designated group who is presumed to be socially disadvantaged may certify eligibility for the 8(a) program if a preponderance of the evidence establishes the individual's social disadvantage. can. Individual social disadvantage claims are evaluated by the SBA on a case-by-case basis.
Individuals who demonstrate eligibility for the 8(a) program have access to a wide range of benefits, including qualifying for certain reservations and exclusive federal contracts. Receive one-on-one business development support from a dedicated business opportunity expert. Eligible for priority receipt of federal surplus property. Receive free training from the SBA's 7(j) Management and Technical Assistance Program.
ULTIMA SERVICES CORP. v. U.S. Department of Agriculture
in altima service, after USDA refused to exercise options under plaintiffs' indefinite delivery/indefinite quantity contracts and instead awarded exclusive sourcing contracts to companies participating in SBA's 8(a) business development program. Plaintiffs sued USDA and SBA. Plaintiff was not eligible for exclusive source agreements entered into through that program because he was not a participant in the 8(a) program. The plaintiffs filed suit, alleging that the SBA's use of a “rebuttable presumption” to determine eligibility for the 8(a) program violates the plaintiffs' Fifth Amendment right to equal protection, among other claims. It challenged the USDA's actions on multiple grounds.
In an opinion responding to the parties' cross-motions for summary judgment, the district court found that the “rebuttable presumption” did not withstand strict scrutiny and did not actually violate the plaintiff's Fifth Amendment rights. It was held that In support of these conclusions, the court cited recent decisions of the U.S. Supreme Court. Student for Fair Admissions Inc. v. Harvard University President and Fellows, in which the court held that it is unconstitutional for universities to use race-based affirmative action in the admissions process. Based on this reasoning, the district court enjoined USDA and SBA from using “rebuttable presumptions” of social disadvantage against certain minority groups when conducting 8(a) business development programs. .
Many small businesses that received an injunction and qualified for the program based on a “rebuttable presumption” of social disadvantage have to explain why they are socially disadvantaged. You will be asked to provide an explanation.
The SBA has also temporarily suspended the filing of new 8(a) applications. This means that new applications will not be accepted until a date to be determined at a later date.
For now, it is unclear whether or how this injunction will affect the SBA's 8(a) business development program in the long term, and if the appeal of the district court's order is successful. The injunction may be lifted. The district court also indicated that it intends to consider additional relief after a hearing scheduled for late August. Morgan Lewis will continue to monitor the injunction and the SBA's response.
The district court relies on the Supreme Court's recent affirmative action decisions. Students aiming for fair admission This is also one of the first interpretations of that new precedent. Morgan Lewis will be tracking these new developments as the dust settles in the wake of this Supreme Court decision, and as courts rely on it to respond to a variety of claims. To stay up to date on this evolving landscape, visit the U.S. Supreme Court's Affirmative Action Decision: DEI and ESG Implications Resource Center and subscribe to our mailing list.