Ultima Services Corp. v. U.S. Dept. of Agriculture

On Friday, September 15, 2023, Ultima Services Corporation (“Ultima”) filed a motion for additional equitable relief in Ultima Services Corp. v. U.S. Dept. of Agriculture, et. al., Case No. 2:20-cv-00041. This motion is in response to the District Court’s order providing for further briefing on Ultima’s remaining claims following the District Court’s issuance of a preliminary injunction prohibiting the Small Business Administration (the “SBA”) from using the rebuttable presumption of social disadvantage contained at 13 CFR 124.103(b) in connection with the SBA’s 8(a) program.

Ultima’s motion asks the District Court to:

1. make clear that the District Court’s preliminary injunction:

1. 1. enjoins the federal government from exercising options or making similar modifications to 8(a) Program contracts with contractors that entered the 8(a) Program based on the rebuttable presumption; and

b. precludes the SBA from providing a shortened or less rigorous review of narratives of social disadvantage than was applied to the submission of evidence under 13 C.F.R. § 124.103(c) prior to the District Court’s preliminary injunction;

2. enjoin the federal government from using the 8(a) Program in the administrative and technical support industry at all, which is not specifically defined by Ultima but would likely include NAICS Codes 541611 (Administrative Management and General Management Consulting Services), 561110 (Office Administrative Services), and 561320 (Temporary Help Services);

3. either appoint a monitor to review the SBA’s certification of 8(a) participants who previously had received the benefit of the rebuttable presumption or make the narrative essays of social disadvantage (and the SBA’s decision with respect to each of them) public with appropriate redaction of identifying information; and

4. immediately and temporarily enjoin the federal government from awarding, completing, modifying, or exercising options on any 8(a) contracts involving 8(a) entities who entered the 8(a) Program based on the rebuttable presumption, regardless of whether the SBA subsequently approved a “narrative of social disadvantage,” until the District Court resolves the merits of Ultima’s new request for equitable relief.

Ultima’s motion addresses two main issues: how the SBA is implementing the District Court’s injunction, and whether contracts in the administrative and technical support industry should be removed from the 8(a) Program.

Of most significance to Alaska Native Corporations, Tribes, and Native Hawaiian Organizations is Ultima’s request for an order barring the use of the 8(a) Program in the administrative and technical support industry. Although Ultima does not specifically define what that “industry” covers, it specifically calls out 8(a) contracts awarded under NAICS Codes 541611 (Administrative Management and General Management Consulting Services), 561110 (Office Administrative Services), and 561320 (Temporary Help Services). Ultima’s request for an injunction barring use of the 8(a) Program in those areas does not include any carve out for 8(a) entities owned by Alaska Native Corporations, Tribes, or Native Hawaiian Organizations, and, if granted, could impact their work in those NAICS codes. As such, this new motion is the first time that Alaska Native Corporations, Tribes, and Native Hawaiian Organizations may be potentially directly impacted by a ruling in Ultima. Entities owned by Alaska Native Corporations, Tribes, and Native Hawaiian Organizations do not rely on any rebuttable presumption of social disadvantage for entry into the 8(a) Program, and so have not been directly impacted by the Ultima injunction to date.

The government’s response to Ultima’s motion is due September 29^th, although the District Court may order a response sooner given Ultima’s request for a temporary injunction pending completion of briefing and a decision on Ultima’s motion.

SBA’s Implementation of the District Court’s Injunction

Ultima’s motion attempts to, in Ultima’s view, prevent the SBA from effectively avoiding the impact of the District Court’s preliminary injunction by accepting social disadvantage narratives from existing 8(a) contractors without critical review and maintain the status quo (i.e. no new 8(a) contracts or extensions of 8(a) contracts to 8(a) entities who entered the 8(a) Program based on the rebuttable presumption) until Ultima’s motion is decided.

Ultima disagrees with the SBA that the exercise of options and award of contracts announced prior to the District Court’s injunction does not implicate the rebuttable presumption that the District Court found to be unconstitutional. Ultima argues that:

To “use” the presumption in administering the Program is not merely to make it, but to take advantage of it. Exercising an option is a choice, and choosing to exercise an option on an 8(a) reserved requirement with firms whose owners received the benefit of the presumption is a choice to take advantage of that presumption rather than find another 8(a) contractor or compete the contract among all small businesses. That the exercise of the option does “not require an SBA eligibility determination” (Doc. 88 at 3 (¶ 10)) is irrelevant.

Ultima also takes issue with the manner in which the SBA is processing the social disadvantage narratives of entities within the 8(a) Program.

As noted previously, the SBA has used four layers of review of applications, viz., the Business Opportunity Specialist in OCE, a supervisor in that office, the Director of OCE, and the BD Assistant Administrator. The requirement that OCE review any application – and evidence of social disadvantage is part of the application – is mandated by Congress, which created the Division of Program Certification and Eligibility by statute and gave it the responsibility of “receiv[ing], review[ing], and evaluat[ing] applications for certification.” Section 201(a) of Pub. L. 100-656, 15 U.S.C. § 636(j)(11)(E), (F). SBA’s suggestion that it will be able to turn narratives around in five business days or less gives reason for concern. It is unclear, for example, whether pending applications from non-minorities (Doc. 88-1, p. 2 (¶ 2)) are given any expedited treatment.

If 8(a) participants that received the presumption are not being required to go through the same processes and standards that other applicants went through (i.e., submitting evidence of social disadvantage meeting the preponderance of the evidence standard), that is “using” the presumption, because it is easing the burden on those (and only those) that received the presumption.

Accordingly, Ultima asks the District Court to issue an additional order requiring the SBA to both (i) not process any contracts or options for 8(a) entities who entered the 8(a) Program based on the rebuttable presumption until they have been determined to be socially disadvantaged, and (ii) apply the same standards for determining social disadvantage prior to the District Court’s injunction.

Ultima also asks the District Court to either appoint a monitor to review the SBA’s decisions regarding whether existing 8(a) Program participants had proved social disadvantage, or make the 8(a) Program participants’ social disadvantage narratives public, with identifying information redacted. Ultima’s stated goal is to generate public information so that “the Court and the public may be assured that the SBA is applying the same rigorous review of social disadvantage narratives that it required for the ‘=evidence’ standard under Section 124.103(c) for others prior to this Court’s order.”

Exclusion of Contracts In the Administrative and Technical Support Industry From the 8(A) Program

The Ultima case arose out of Ultima’s loss of a contract that fell within the administrative and technical support industry. Ultima therefore asks the District Court to exercise its equitable authority to “precluding defendants from using the 8(a) Program in her industry.”

Ultima argues that:

Here, Plaintiff is not seeking any race-conscious remedy at all, but simply an order precluding defendants from using the 8(a) Program in her industry. The plaintiff was precluded from gaining work because of the defendant’s discrimination. As noted earlier, the number of NRCS contracts that the defendants set aside for the 8(a) Program in Plaintiff’s industry, administrative and technical support, appears to greatly outnumber the contracts in that industry that were available for competition, either among all firms or all small businesses. Accordingly, the Plaintiff’s income dropped significantly. Doc. 60-4, p. 4 (PageID # 858) ¶ 21.

But even outside NRCS contracts, the federal government utilizes contracts in the Plaintiff’s industry for the Section 8(a) Program to a substantial degree. The three NAICS codes that have been most frequently associated with the administrative and technical support industry – 541611 (Administrative Management and General Management Consulting Services), 561110 (Office Administrative Services), and 561320 (Temporary Help Services) – were all in the top twenty NAICS codes used by the Section 8(a) Program according to the SBA’s 408 Report in 2017. Rosman Supplemental Statement Ex. 2 .2 See also Doc. 60-4 at 3-4 (PageID ## 857-58) ¶ 18. As this Court noted in its July 19 Opinion, Ultima “operates within a specific set of industries and [contracts in its industry] represent a substantial amount of revenue” (Op. 40).

Citing an injunction in DynaLantic Corp. v. United States Dep’t of Defense, 885 F. Supp. 2d 237, 293 (D.D.C. 2012), Ultima argues that the case held that the “8(a) Program was unconstitutional as applied to the military simulation industry because the defendants had not supplied a compelling governmental interest for its use in that industry (while upholding its use more generally).” Ultima claims that:

under the DynaLantic injunction, defendants could not award contracts through the Section 8(a) Program in the relevant industry, even to 8(a) participants who had not benefitted from the presumption of social disadvantage. Given the much broader flaws that this Court found in the Section 8(a) Program, it stands to reason that a significant number of non-8(a) firms (including non-8(a) SDBs) were harmed by the Section 8(a) Program. The effect on Ultima in its industry has been significant. And Ultima is not seeking a leg up on any other competitors (8(a) or otherwise), just an opportunity to compete. Under Ultima’s proposal, Section 8(a) contractors can compete for and bid on any contracts for which they are qualified (just as they could for any military simulation contracts in DynaLantic).

Accordingly, an order precluding defendants from utilizing the 8(a) Program in Ultima’s industry would be an appropriate use of this Court’s equitable authority.

Although Ultima does not specifically define what is included in Ultima’s “industry,” its brief suggests that, at a minimum, it would include contracts awarded under NAICS Codes 541611 (Administrative Management and General Management Consulting Services), 561110 (Office Administrative Services), and 561320 (Temporary Help Services).

Ultima’s request for an order barring the use of the 8(a) Program in its “industry” is not limited, but would apply to all 8(a) contracts, including those that could be awarded to 8(a) entities owned by Alaska Native Corporations, Tribes, and Native Hawaiian Organizations.