The US Small Business Administration (“SBA”) has a long history of supporting socially and economically disadvantaged business owners under Title 15, Chapter 14A, Sections 636(j)(10) and 637(a) of the United States Code. One of its notable programs is the 8A Business Development program. The 8A program allows socially and economically disadvantaged business owners to achieve a more equal footing in doing business with the federal government. Small business participants may choose to become 8(a) certified which offers numerous benefits to capture contract opportunities with the federal government. According to the program’s benefits overview, accessible on the SBA website, certified 8(a) businesses can compete and receive set-aside and sole source contracts; receive one-on-one business development assistance; specialized opportunities for mentorship from experienced firms; work with procurement and compliance experts to assist navigating complex government regulations; joint venture and teaming opportunities with established businesses; free management and technical training; and the ability to compete for government contracts under a variety of socioeconomic programs.[1]

To qualify for the opportunities under the 8(a) Business Development program, a firm must be at least 51% owned and controlled by socially and economically disadvantaged U.S. citizens and have been in business for at least two years, as well as, meeting other financial criteria. Once a business has been accepted into the program, they are eligible to participate for a total of nine years and must remain eligible throughout the term of the program.

The 8(a) Business Development program has recently made major changes as to how a business is required to prove it is 51% owned and controlled by socially and economically disadvantaged U.S. citizens. Historically, the SBA would apply a race-based presumption that automatically applied a social disadvantage to certain racial minorities (Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans) without requiring any proof to the contrary. If none of the owners were of a qualified race, then the alternate proof to qualify was to write an essay or narrative explaining how the owner was socially or economically disadvantaged and it would be evaluated on a case-by-case basis. Effectively, the 8(a) Business Development program operated an affirmative action program in certifying qualifying businesses into the program.

Recently, in June of 2023, the Supreme Court effectively ended affirmative action in the higher education application process and the precedent-setting case Students for Fair Admissions, Inc. v. President & Fellows of Harv. Coll., 143 S. Ct. 2141 (2023). While Students for Fair Admissions, Inc. applies to evaluate race as an admissions criterion in the higher education application process, several questions remain unanswered as to how race applies in other areas of the federal government and contract procurement.

Based on the Supreme Court’s June decision, a U.S. District Court in the Eastern District of Tennessee addressed the issue of whether the Defendant’s, the United States Department of Agriculture (“USDA”), and the SBA, violated Plaintiff’s, Ultima Servs. Corp.’s (“Ultima”), fifth amendment right to equal protection under the law by using a “rebuttable presumption” of social disadvantage for certain racial minority groups to qualify them for inclusion in the 8(a) Business Development program. Ultima Servs. Corp. v. United States Dep’t of Agric., 2023 U.S. Dist. LEXIS 76278, 2023 WL 3211860 (E.D. Tenn., Jul. 13, 2023) While litigation is still ongoing, the Court ruled on a Motion for Summary Judgment that SBA’s use of the rebuttable presumption violated Plaintiff’s right to equal protection under the law. In providing relief, the Court immediately enjoined the SBA from using the rebuttable presumption of social disadvantage in the administration of the 8(a) Business Development program.

Based on the early rulings in the Ultima case, the SBA now requires every future and existing participant claiming economic or social disadvantage in its’ 8(a) Business Development program to write a narrative or fill out a questionnaire demonstrating their social disadvantage. These “narratives” will be submitted to the SBA and independently evaluated. There are going to be challenges navigating what evaluation methods will be used and how the SBA defines relevant terms. What will be the review process for participants who have not demonstrated the requisite social and economic disadvantage – and will there be opportunities to amend? These narratives can have a significant impact on a small business that are exploring 8(a) certification.

[1] https://www.sba.gov/federal-contracting/contracting-assistance-programs/8a-business-development-pro gram#id-program-overview (Nov. 20, 2023).

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