A recent decision by the District Court for the District of Columbia could spell trouble for the Section 8(a) program. In DynaLantic Corp. v. Dept. of Defense, the court held the Small Business Act program was unconstitutional as applied to the military simulation and training industry.
The court addressed “facial” and “as applied” challenges. In holding the Section 8(a) program was constitutional on its face, the court found there was “a strong basis in evidence that remedial action was—and remains—necessary to remedy nationwide discrimination in the construction industry, at the very least.” For the “as-applied” analysis, however, the court rejected the government’s argument it did not need to “tie evidence of discriminatory barriers to minority business formation and development to evidence of discrimination in any particular industry.” To show it had a compelling interest in remedying discrimination in the military simulation and training industry, the government had to provide evidence from which to infer the existence of discrimination in the industry.
The government didn’t offer this industry-specific evidence, and the court enjoined awards for military simulators under the 8(a) program without a strong basis in evidence. In response, DoD announced the immediate cessation of 8(a) contract awards, including extensions or the exercise of options, for military simulators or services in the military simulator industry.
If it stands, DynaLantic opens the door to industry-based challenges to the Section 8(a) program. While statistical evidence of “the disparity, if any, between availability and utilization of minority owned businesses” may be readily available for broad-based industries such as construction, it may not exist for industries with smaller numbers of participants.
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