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Dear USET/USET SPF Family,
On July 19, 2023, a federal court ruled the Small Business Administration (SBA) and the U.S. Department of Agriculture (USDA) violated the U.S. Constitution’s equal protection requirements in their operation of the 8(a) Program. The decision
was issued by the U.S. District Court for the Eastern District of Tennessee Greeneville Division in Ultima Servs. Corp. v. U.S. Dep’t of Agric.
Section 8(a) of the Small Business Act grants the SBA the authority to acquire procurement contracts from other government entities and to award those contracts to small businesses, and specifically to socially and economically disadvantaged small business concerns, which include those majority owned by socially and economically disadvantaged individuals. The Small Business Act notes that many such individuals are socially disadvantaged because of their identification as members of certain minority groups, including Native people. In its regulations implementing the 8(a) Program, the SBA set forth a rebuttable presumption that an individual within certain minority groups is a socially and economically disadvantaged individual and should receive contracting preference, and Native people are one such group.
The court in Ultima ruled unconstitutional the use of this rebuttable presumption, enjoining the SBA and USDA from using the rebuttal presumption in administering the 8(a) Program. The court said the rebuttable presumption was a racial classification to which strict scrutiny applies, and it held the rebuttable presumption did not satisfy strict scrutiny—requiring the action to further a compelling governmental interest and be narrowly tailored to achieve that interest. The court reasoned that, while the government said the use of the rebuttable presumption was to remedy the effects of past racial discrimination in federal contracting, it had not demonstrated a compelling interest because it did not support its use “with precise evidence.” The court found the SBA and USDA had not demonstrated the government was a participant in past discrimination within the relevant industries at issue in the case and had not established goals that would allow measuring the utility of the rebuttable presumption in remedying the effects of past racial discrimination. The court also held the rebuttable presumption was not narrowly tailored, as it did not have a termination date or a specific objective, the minority group categories were imprecise for measuring discrimination, and the government did not adequately explore race-neutral alternatives.
The court’s injunction against the SBA’s and USDA’s use of the rebuttal presumption for the 8(a) Program is not limited in any way. However, under existing Supreme Court precedent, special programs and benefits provided by the government to Tribal Nations and Native people are not suspect racial classifications subject to strict scrutiny. Thus, the relevancy of the holding that the rebuttal presumption in the 8(a) Program does not survive strict scrutiny is questionable when applied to Native-owned businesses. The court in Ultima is reserving its ruling on any further remedy subject to a hearing on August 31, 2023, and it may address this nuance there.
The decision in Ultima is part of a larger trend, where the Supreme Court has made increasingly clear that all instances where the government treats people differently on the basis of race will be subject to a rigorous application of strict scrutiny, even to remedy past discrimination and harms through affirmative action-type treatment. At the same time, some members of the Supreme Court have indicated an interest in revisiting the Mancari rule that special programs and benefits for Tribal Nations and Native people are not suspect racial classifications subject to strict scrutiny. If the Mancari rule is overturned or narrowed, and some actions taken on behalf of Tribal Nations and Native people are deemed racial classifications, the Ultima decision and cases like it will make it more difficult for those actions to pass equal protection review.
To that end, USET SPF has prepared a summary document that provides an overview of the foundations of Indian law, the challenges we face under recent Supreme Court cases, and what's at stake. We encourage you to review this document, as it offers a primer on why we Indian Country must remain vigilant and united as our sovereignty and unique political, Nation-to-Nation, diplomatic relationship with the United States are subject to repeated attacks in the courts, like that under Ultima.
We will continue to monitor developments in this and other issues related to the constitutionality of our special and unique relationship with the federal government, and will provide updates as they become available.
For more information, please contact Liz Malerba, USET SPF Director of Policy and Legislative Affairs, at lmalerba@usetinc.org.
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