On Friday, October 6, 2023, Ultima Services Corporation filed a reply brief in Ultima Services Corp. v. U.S. Dept. of Agriculture, et. al., Case No. 2:20-cv-00041, which continued to argue for an injunction against the award of 8(a) contracts in the administrative and technical support industry.
In its latest brief, Ultima argued in favor of a complete ban on the award of 8(a) contracts in the administrative and technical support industry (including a ban on awards to 8(a) entities owned by Alaska Native Corporations and Tribes). Ultima also suggested, in a footnote, that contracting advantages provided to Alaska Native Corporations within the 8(a) program are based on a racial, and not political, classification because “[t]he specific blood requirement for Alaskan Natives distinguishes ANCs from Indian Tribes.”
First, a brief recap. On July 20, 2023, the District Court issued an injunction that barred the Small Business Administration (“SBA”) from applying the rebuttable presumption of social disadvantage contained at 13 C.F.R. § 124.103(b)(1), finding that such presumption was unconstitutional because it applied only to certain races and ethnicities.
On September 15, 2023, Ultima filed a motion with the District Court that asked the court to: (i) bar SBA from applying a less stringent standard for establishing social disadvantage than what was applied prior to issuance of the injunction; (ii) bar the exercise of any option or issue of a task order under existing 8(a) contracts awarded to 8(a) entities that received the benefit of the rebuttable presumption; (iii) either appoint a monitor to review the SBA’s evaluation of the social disadvantage narratives submitted in response to the injunction, or require the SBA to disclose those social disadvantage narratives (with identifying information redacted); and, (iv) of greatest concern to Alaska Native Corporations and Tribes, bar the award of any 8(a) contracts in the administrative and technical support industry for an undetermined length of time.
On September 29, 2023, the federal government opposed Ultima’s request, arguing that the SBA was applying the same standard to review social disadvantage that it applied prior to the injunction; that a monitor or disclosure of social disadvantage narratives was unnecessary; and that the exercise of options and issuance of task orders for existing 8(a) contracts do not require SBA approval or action and are therefore not subject the District Court’s injunction. The federal government also argued that Ultima’s request for an order barring the award of any 8(a) contracts was overbroad and not supported by the law or the facts. The federal government pointed out that such an order would affect 8(a) entities that did not benefit from any presumption of social disadvantage, such as Alaska Native Corporations and Tribes.
On September 29, the National Center for American Indian Enterprise Development (NCAIED) and the Tunica-Biloxi Tribe of Louisiana filed an amicus brief to oppose Ultima’s request for an order barring the award of any 8(a) contracts in the administrative and technical support industry. NCAIED and the Tunica-Biloxi Tribe of Louisiana echoed the federal government’s arguments, and raised the point that Alaska Native Corporations and Tribes do not benefit from any presumption of social disadvantage, and that any advantages provided to Alaska Native Corporations and Tribes in the 8(a) program arise out of a political, versus racial, classification.
This brings us to the latest filing. On Friday, October 6, 2023, Ultima filed its reply brief. Ultima continued to seek a court order that bars the award of 8(a) contracts in the administrative and technical support industry, with the argument that “[t]he use of equitable relief here to ameliorate the lingering effects of discrimination is particularly important given that a damages remedy is unavailable under this Court’s prior rulings.” As support, Ultima pointed to an injunction issue in DynaLantic v. Dep’t of Defense, 885 F. Supp. 2d 237 (D.D.C. 2012), pursuant to which the Department of Defense was barred from using the 8(a) program in connection with the military simulation industry. Ultima argued an injunction that prohibits the award of 8(a) contracts in the administrative and technical support industry would not adversely affect the federal government because “[a]ll any agency would have to do is follow the normal procedures for government contracting: create a requirement and invite interested contractors to bid.”
Ultima also directly addressed the impact of such an order on entity-owned 8(a) companies. Notably, Ultima appeared to take issue with the point raised by the federal government, NCAIED, and the Tunica-Biloxi Tribe of Louisiana, that Alaska Native Corporations do not rely on the rebuttable presumption of social disadvantage to participate in the 8(a) program; and that any special rules Congress applies to Alaska Native Corporations in the context of the 8(a) program are due to a political classification, as opposed to a racial one. Ultima argued in a footnote that:
Defendants assert that entity-based participants “never relied on the presumption.” This is a bit misleading. Entity-owned participants do not have to prove social disadvantage (and Alaska Native Corporations need not prove social or economic disadvantage). 13 C.F.R. § 124.109(a)(4) (individuals controlling ANC-owned participants need not show social or economic disadvantage). Presumably, Defendants are asserting that there is no racial distinction, although this too is debatable at best. 43 U.S.C. § 1602(b) (defining “Alaska Native” by “minimum blood quantum”); 43 U.S.C. § 1606(g) (shares of stock in ANCs distributed to Alaska Natives). None of the cases that amici cite on pages 7-8 of their brief to support the proposition that tribal classifications are political involved ANCs. The specific blood requirement for Alaskan Natives distinguishes ANCs from Indian Tribes. Id. at 9 n.8. (emphasis added)
This footnote suggests Ultima (or others) may seek to attack Alaska Native Corporation participation in the 8(a) program as unconstitutional racial discrimination based on the argument that ANCSA (43 U.S.C. § 1602(b)) defines a Native based, in part, on blood quantum, and Alaska Native Corporations’ advantages in the 8(a) program are based on the fact that Natives or descendants of Natives own them. It is worth noting that Ultima does not directly ask the District Court for any relief or order on that issue.
With regard to the actual merits of Ultima’s request for an injunction to bar the award of 8(a) contracts in the administrative and technical support industry, Ultima asserts that the adverse impact such an injunction would have on 8(a) participants that did not benefit from the presumption of social disadvantage is necessary to remedy the discrimination Ultima claims it suffered:
Defendants (and the amici) point out that the injunction would affect all 8(a) participants, even those not benefitted in the past by the presumption of social disadvantage, while the amici point out that ANCs and Native American tribes that participate in the 8(a) program would be affected. This is so, but it is a standard application of equitable principles that equitable relief to remedy discrimination will sometimes affect third parties who were not responsible for the discrimination. When crafting a properly tailored remedy to cure the effects of prior discrimination, “a sharing of the burden” by innocent parties is permissible…. And, here, it is hardly a heavy burden such third parties are being asked to carry, particularly when one considers the scope of contracts in administrative and technical services compared with the plethora of overall federal contracting opportunities.
Ultima argues that 8(a) entities can merely compete with Ultima for contracting opportunities:
Ultima is not asking this Court to give it an advantage over any 8(a) participant. It is merely asking that it not be put at a disadvantage. Participants in the Section 8(a) Program, whether they received the benefit of the presumption of social disadvantage or not, are free to bid against Ultima (or anyone else) for any contract in the administrative and technical support industry.
In addition to seeking an injunction, Ultima also continued to take issue with the SBA’s process for evaluating social disadvantage narratives submitted by 8(a) entities that originally received the benefit of the presumption of social disadvantage. Ultima argued that the process described by the SBA for reviewing such narratives does not include the “four-part” review that applies to 8(a) applicants ineligible for the presumption of social disadvantage, and it took issue with the time frame and staffing SBA has deployed to address the social disadvantage narratives:
Defendants give no assurance that the narratives of social disadvantage are receiving the same levels of scrutiny as those previously submitted by companies whose owners were not members of the preferred races.
Moreover, there is no discussion of the four-level review that applied to the narratives that were part of the applications that individuals not benefited by the presumption of social disadvantage previously submitted.
These lingering questions surrounding this process demand some sort of prophylactic relief, whether it be disclosure of the narratives or monitoring the process.
Finally, Ultima takes issue with the federal government’s argument that the exercise of options and issuance of task orders on existing 8(a) contracts is not covered by the District Court’s injunction. Ultima maintains that if an 8(a) entity received the benefit of the presumption of social disadvantage, any contract action involving that entity is necessarily “using” the presumption of social disadvantage, such that the District Court should bar the exercise of options or award of task orders until the 8(a) entity has established their social disadvantage without the use of the rebuttable presumption:
Thus, according to Defendants, this Court’s decision to enjoin the USDA from “using” the presumption was pointless because the USDA never uses the presumption, at least not on its own. But why should this be so? If it issues a task order in the 8(a) Program pursuant to a multiple award contract, it is bestowing a benefit on the contractor. If that contractor is in the 8(a) Program because of the presumption of social disadvantage, the agency is using that presumption to obtain some service that it needs that it would otherwise have to get through some other means (including through open bidding or through an 8(a) contractor that did not enter the Program with a presumption).
The District Court has not yet set a hearing date on Ultima’s motion. We will continue to monitor the matter.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
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