ALERT: Court Enjoins SBA from Using Rebuttable Presumption in 8(a) Program
On July 19, 2023, the U.S. District Court for the Eastern District of Tennessee held in Ultima Servs. Corp. v. U.S. Dep't of Agric. that the "rebuttable presumption" under SBA's 8(a) BD Program violated a plaintiff's Fifth Amendment right to equal protection under the law. In so doing, the Court ENJOINED the SBA from using the rebuttable presumption for social disadvantage in administering SBA’s 8(a) BD Program.
While it is possible that the SBA may appeal the decision, small business contractors seeking to participate in SBA's 8(a) BD Program that plan on relying on SBA's rebuttable presumption to establish social disadvantage will instead need to address the requirements for establishing social disadvantage under 13 C.F.R § 124.103(c).
I will continue to monitor this case.
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Quick Take on What this Means
Generally, to participate in SBA's 8(a) program a person must be a socially- and economically-disadvantaged individual. 13 C.F.R. § 124.103.
Currently SBA provides a rebuttable presumption of social disadvantage to certain individuals (e.g., "Black Americans; Hispanic Americans; Native Americans (Alaska Natives, Native Hawaiians, or enrolled members of a Federally or State recognized Indian Tribe); Asian Pacific Americans..."). 13 C.F.R. § 124.103(b). There are others.
If an individual is not part of a group that is listed in SBA's rebuttable presumption section, that individual must establish and provide evidence of social disadvantage, which includes the following elements: (1) an objective distinguishing feature such as race, ethnic origin, gender, identifiable disability, etc.; (2) social disadvantage must be rooted in treatment which they have experienced in American society; (3) social disadvantage that is chronic and substantial, not fleeting and insignificant; and (4) social disadvantage that has a negative impact on entry into or advancement in business world (e.g., education, employment, and business history). 13 C.F.R. § 124.103(c). This process requires a narrative.
This decision halts the SBA's use of rebuttable presumption under 13 C.F.R. § 124.103(b), which means those individuals will need to affirmatively establish social disadvantage instead of relying on the rebuttable presumption that they are socially disadvantaged.
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