Court Rules Against USDA and SBA in Case Challenging Minority Contracting Program

In a significant ruling, the United States District Court for the Eastern District of Tennessee has ruled against the United States Department of Agriculture (USDA) and the Small Business Administration (SBA) in a case concerning the use of a “rebuttable presumption” of social disadvantage for certain minority groups in federal contracting.

The plaintiff, Ultima Services Corporation, a small business not entitled to that presumption, argued that the USDA and SBA’s use of the rebuttable presumption violated its right to equal protection as it did not further a compelling governmental interest and was not narrowly tailored to achieve that interest. The court agreed with Ultima and granted its motion for summary judgment in part, while denying the defendants’ motion for summary judgment.

The case revolved around the 8(a) Business Development Program, which awards government contracts on a preferred basis to businesses owned by individuals in certain minority groups. Ultima, which had earned approximately $37 million since 2015 from federal services contracts with the USDA, saw a decline in revenue after the USDA decided to set aside contracts for the 8(a) program.

The court’s ruling could have significant implications for federal contracting and the enforcement of equal protection laws. The outcome of this case may influence how federal agencies approach the awarding of contracts and could potentially lead to changes in the regulations governing federal contracting programs.