Federal Court Asked to Further Limit the 8(a) Program

As we’ve discussed in two prior legal updates, on Aug. 18, the U.S. Small Business Administration released official guidance on next steps for current 8(a) Participants and new applicants to the 8(a) Program after the U.S. District Court for the Eastern District of Tennessee enjoined the SBA on July 19, from using a rebuttable presumption of social disadvantage “in administering” the 8(a) program. The Court requested follow-on briefings regarding additional equitable relief and the SBA’s compliance with the injunction. In a filing on Sept. 15, Ultima asked the Court to issue an additional injunction temporarily blocking the SBA “from awarding, completing, modifying, or exercising options on any contracts through the 8(a) program to 8(a) participants who received the benefit of the rebuttable presumption – regardless of whether the SBA subsequently approved a narrative of social disadvantage.”

Citing a widely viewed webinar presented by a senior SBA attorney, Ultima asserts the SBA is now improperly using a “less rigorous” narrative review process that is “easing the burden on those (and only those) that received the presumption” while saying nothing about whether non-minorities are afforded the same expedited treatment.  Ultima argues that this alleged easy path is inconsistent with the Court’s injunction, as the SBA would continue to provide 8(a) businesses the benefit of using a previously granted rebuttable presumption.

In addition to the request for a temporary injunction over the SBA’s stopgap “narrative” process, Ultima is asking the Court to either require all social narratives to be made public or to appoint a “monitor” to act as a reviewer of the SBA’s approval process to ensure it complies with the Court’s guidance. Ultima further requests the Court order the SBA to identify how many narratives of social disadvantage have been approved, and how many have been rejected, since the Court’s July 19 order – for both pending applications from non-minorities and those narratives submitted by those who previously benefitted from the presumption.

The Government’s response to Ultima’s brief is due Sept. 29 with the final briefing due Oct. 6. We will not predict how the Court will rule but we would expect a relatively quick ruling on Ultima’s request for a temporary halt on the SBA’s review of narratives.  An ultimate ruling in favor of Ultima will likely force the SBA to (1) promptly appeal to the Sixth Circuit and/or (2) rethink its implementation of the 8(a) Program and other disadvantaged contracting programs.

Clark Hill’s Government Contracting and Regulatory team will continue to monitor this evolving situation and will provide additional updates following each additional briefing and the Court’s rulings. Clark Hill’s team stands ready to assist 8(a) Participants and applicants as needed.

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