According to the SBA’s 8(a) certification website…
On July 19, 2023, the United States District Court for the Eastern District of Tennessee enjoined SBA from applying a rebuttable presumption of social disadvantage to individuals of certain racial groups applying to the 8(a) Business Development program. SBA has temporarily suspended new 8(a) application submissions to comply with the Court’s decision.
On August 18th this year, the U.S. Small Business Administration issued interim guidance affecting the program’s determination of social disadvantage in response to a ruling by a U.S. District Court in the matter of Ultima Servs. Corp. v Dep’t of Agric., et al. The 8(a) Program is in a state of uncertainty. In accordance with the court’s directive, the SBA now mandates that all participants, whose program eligibility was predicated on one or more individuals utilizing the presumption of social disadvantage, submit a comprehensive social disadvantage narrative. The SBA’s approval of this narrative is a prerequisite for participants to be eligible to receive future 8(a) contract awards.
The updated interim guidance for 8(a) Program participants and applicants can be found on the SBA’s website here.
Context of the legal action- Ultima Servs. Corp. v. U.S. Dep’t of Agric
The U.S. District Court for the Eastern District of Tennessee on July 19, 2023, issued a ruling in Ultima Servs. Corp. v. U.S. Dep’t of Agric., No. 2:20-CV-00041-DCLC-CRW, 2023 WL 463348 (E.D. Tenn. July 19, 2023), that found the SBA’s use of a "rebuttable presumption" of social disadvantage for certain minority groups to qualify for inclusion in the 8(a) Program violates the Fifth Amendment’s Due Process Clause. The court ordered SBA to immediately stop using the presumption of social disadvantage to administer the 8(a) Program.
In summary, in adherence to the court’s mandate, the SBA necessitates that all 8(a) program participants, whose eligibility was contingent upon one or more individuals relying on the presumption of social disadvantage, substantiate their individual social disadvantage by completing a social disadvantage narrative. The SBA must then approve the narrative before the 8(a) participant can receive future 8(a) contracts.
Conclusion
In its Opinion and Order, the district court enjoined the SBA from using the rebuttable presumption of social disadvantage in the administration of the 8(a) program. However, the District Court reserved the right to rule on any further remedy and has scheduled a hearing on this matter for August 31, 2023. An appeal and a potential stay of the ruling pending appeal are probable. Several open questions arise regarding the implications of this decision, including the SBA’s method of compliance with the court’s order and whether it carries nationwide applicability.
Follow up information will be provided as it becomes available.
Inquiries regarding the aforementioned information, please feel free to contact:
Lisa J Dolan, CPP
Advisor- Government Contracting Services
Whitehaven Advisors LLC
lisad@whitehavenadvisors.com