The U.S. District Court judge who banned the SBA from using a rebuttable presumption of social disadvantage for members of certain minority and ethnic groups in SBA’s 8(a) Business Development program has not issued a final ruling yet. But that did not stop the House Small Business Committee Chair Roger Williams, R-TX, from announcing on December 1 that the Committee is initiating an investigation of SBA’s compliance with the judge’s prohibition. SBA, in response to the judge’s order, began requiring all 8(a) applicants and current participants who benefited from the presumption to submit a detailed narrative describing their experiences of social disadvantage.
The court currently is still considering additional actions, including possibly permanently disallowing 8(a) set-asides in a broad set of industries. Set-Aside Alert interviewed Tony Franco, Managing Partner of the law firm PilieroMazza, about the case and the Committee’s probe. Please visit this link for the full article (subscription required).
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Set-Aside Alert: Was it unusual for the House committee to investigate SBA’s compliance with a court order while the judge is still considering a final order?
Franco: Not necessarily, as the committee has an oversight role over the SBA. The plaintiff in the district court case has questioned how the SBA is complying with the court’s order as it relates to the vetting of 8(a) participants. It is not strange for a congressional committee to want to look at an agency’s regulatory vetting process.
At the same time, there is a huge political movement targeting affirmative action programs and this is part of that drive. I believe (this investigation by the committee is likely politically driven. It seems unusual that the committee would get involved when the judge is still considering a final order.
Set-Aside Alert: So, oversight would be Congress’ role?
Franco: Yes, oversight.
Set-Aside Alert: The rebuttable presumption for 8(a) applicants has been in place for decades. Now, a narrative is required of everyone who applies.
Franco: Historically, the members of certain groups could check the box to be eligible for 8(a) and provide a very brief narrative. (Along with meeting net worth and other requirements). Now, a more substantive narrative of disadvantage, with examples, is required.
Some people are very upset about the narrative. I had one woman very upset that she was being required to write about incidents that happened long ago. It was very painful for her. She moved on and did not want to relive those experiences again.
Set-Aside Alert: Why hasn’t the SBA appealed the court’s ban?
Franco: Speculating, the SBA may not have appealed because it would go to the US Court of Appeals for the Sixth Circuit, which is a conservative court where the decision likely would be affirmed. If the decision goes to the Circuit Court or the Supreme Court the outcome for the 8(a) program could be worse.
Set-Aside Alert: Should SBA make a new regulation about how 8(a) disadvantage is determined?
Franco: It would be good to do a regulation given the changing legal landscape.
Set-Aside Alert: The House Small Business Committee has been considered a mostly non-partisan committee for many decades. Will it be risky to its reputation to start getting more involved in partisan political issues?
Franco: Normally the people on the committee work well together. They are generally not dealing with momentous issues. It seems the committee is getting involved with a controversial political issue — affirmative action.
In the case of the 8(a) court case, there may be good legal reasons to require updates to the 8(a) program given the evolving case law on affirmative action programs. This can be done by the SBA without Congress getting involved at this time.
Excerpt taken from the article “Attorney Franco Comments on 8(a) Lawsuit” by Alice Lipowicz for Set-Aside Alert. Please visit this link for the full article (subscription required).
About Tony Franco
In addition to serving as Managing Partner of PilieroMazza, Tony has an active practice in the Firm’s Government Contracts Group where he has over 30 years of experience representing government contractors and commercial businesses. His practice encompasses all aspects of federal government contracting. Tony also works closely with attorneys in the Firm’s Business & Transactions Group on corporate transactions and the Labor & Employment Group to address employer-employee challenges in the highly regulated market of government contracting. Tony also works with the Firm’s Litigation & Dispute Resolution Group, which assists clients with commercial and employment disputes that often arise when clients are doing business with third parties.
Tony counsels clients on a wide range of complex legal and regulatory matters, including (i) protests and claims against the federal government; (ii) commercial and contractual disputes; (iii) investigations and compliance audits; (iv) suspension and debarment proceedings; and (v) entity formation, including joint ventures, operating agreements, and shareholder agreements.
Tony primarily represents government contractors—large and small—interested in pursuing set-aside opportunities under SBA’s small business programs. He advises firms on teaming, joint ventures, mentor protégé arrangements, and strategies to defend awards from size, status, and bid protests. Tony assists firms in complying with the FAR and rules applicable to all small business contracting programs. His practice also encompasses the representation of Tribes, Alaska Native Corporations, and their government contracting subsidiaries.
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