The Future of the 8(a) Program

Updates and Opinions on Timely Topics Impacting the Government Contracting Industry from GovCon Expert Ken Dodds

The 8(a) program is a business development program designed to assist firms owned and controlled by socially and economically disadvantaged individuals so that they may compete in the American economy.[1] 8(a) firms receive benefits such as education and technical assistance, sole source contract awards, and the ability to participate in competitions limited to 8(a) concerns.[2] “Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities.”[3] There is a rebuttable presumption that certain groups are socially disadvantaged (Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans).[4] There isn’t a process to challenge that presumption. Individuals that are not members of a presumed group may establish their social disadvantage by submitting a narrative demonstrating an objective distinguishing feature which negatively impacted the individual’s entry into or advancement in the business world, including in the areas of education, employment and business history.[5] Agencies must offer requirements to SBA for acceptance into the 8(a) program.[6] To protect small businesses, SBA cannot accept a requirement into the 8(a) program if acceptance would adversely impact a small business.[7]

A USDA contracting officer offered a requirement to an SBA District Office for acceptance into the 8(a) program. The District Office determined that acceptance would adversely impact the incumbent small business and declined to accept the requirement. The USDA contracting officer then offered the requirement to a different SBA District Office, without mentioning the decision of the other SBA District Office. The second SBA District Office accepted the requirement into the 8(a) program. The small business that had been providing those services sued, arguing that the SBA’s use of a rebuttable presumption of social disadvantage for certain groups for entry into the 8(a) program is racial discrimination in violation of the Fifth Amendment of the Constitution.

The District Court applied strict scrutiny and determined that SBA’s rebuttable presumption was not narrowly tailored to further compelling government interests. Thus, SBA’s use of the rebuttable presumption violates the Plaintiff’s Fifth Amendment right to equal protection of the law. The District Court enjoined SBA from using the rebuttable presumption in administering the 8(a) program. A hearing on further remedies is set for August 31, 2023.[8] Assuming the Government appeals, they could request a stay of the injunction. Assuming the injunction is not stayed, SBA could require all future applicants to submit a social disadvantage narrative. However, what about firms that are already in the 8(a) program that were admitted based on the rebuttable presumption?[9] Will they be suspended from participating in the 8(a) program until they submit, and SBA reviews and approves, a social disadvantage narrative? Will the District Court impose remedies that go beyond the rebuttable presumption?

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[1] 13 CFR 124.1.

[2] 13 CFR 124.404.

[3] 13 CFR 124.103(a).

[4] 13 CFR 124.103(b).

[5] 13 CFR 124.103(c).

[6] 13 CFR 124.502, 124.503.

[7] 13 CFR 124.504(c).

[8] Ultima Servs. Corp. v. U.S. Dep't of Agric., 2023 WL 4633481 (E.D.Tenn. 2023).

[9] The decision should not impact concerns that were admitted into the 8(a) program without the use of the rebuttable presumption, such as those that submitted a social disadvantaged narrative or concerns owned by Tribes, ANCs, or NHOs.?