Tennessee Judge Rules Against SBA Program, Many Minority Businesses In Panic

The business world is witnessing a casualty of the Supreme Court’s landmark decision to strike down race-conscious admissions systems at Harvard College and the University of North Carolina (UNC).

After one federal ruling in Tennessee, thousands of Black, Latino and other minority business owners are in a frenzy. The U.S. Small Business Administration’s 8(a) loan program, designed to bridge the gap between government contracting and historically disadvantaged groups, has been upended.

In the case of Ultima Services Corp. v. U.S. Department of Agriculture, a Tennessee judge ruled that the 8(a) loan program “violates a federal contractor’s Fifth Amendment right to equal protection,” according to an Inc. report. At least 5 percent of all federal contracting dollars have been awarded to small disadvantaged businesses each year for the past five years.

Roughly 4,800 businesses participate in the program, while nearly 4,000 benefited from qualifying under the presumption of social disadvantage, according to the SBA. In 2020, 8(a) participants were bestowed with $34 billion in federal contracts, including $9.3 billion in 8(a) set-aside awards and $11.1 billion in 8(a) sole-source awards, according to the nonprofit think tank Federation of American Scientists. A set-aside award is for certain contractors to compete for; sole-source awards is a “contract-awarded, or proposed for award, without competition.”

With that, businesses also receive training and technical assistance designed to enhance their ability to compete effectively in the marketplace.

Under new requirements, small business owners will no longer have the opportunity to qualify as socially disadvantaged. They will now have to submit an essay describing their negative experience on how their race impacted their success. For existing members of the program, they will also have to pen their hindrances on the basis of their race.

Nicole Pottroff, a government contracts lawyer with Koprince McCall Pottroff in Lawrence, Kansas, has assisted many small business owners in qualifying for the 8(a) program. She told The Washington Post that she has already witnessed a “massive influx” of businesses requesting help with the essay writing portion. From clients to contractors, businesses are in a “full-blown panic.”

In the meantime, SBA is working with the Justice Department to provide additional assistance while staff members undergo trainings.