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September 18, 2012

Court Ruling Might Jeopardize Future of 8(a) Program

Back in August, a us judge in Washington ruled that the Department of Defense cannot favor minority-owned companies when awarding contracts for flight and equipment simulators. While this seems like a very specific ruling, many participants in the 8(a) program are worried that this ruling will impact their ability to go after federal contracts in other areas.

The initial lawsuit was filed in 1995 by flight simulator and military training equipment manufacturer DunaLantic Corp against the Navy for awarding a contract through the program. Jeff Weinstock, vice president and part owner of DynaLantic, said the company filed the lawsuit because officials thought the firm was unfairly getting shut out of programs. Seventeen years later, a judge has determined that setting aside contracts for minority-owned firms without specific evidence that they face discrimination in the industry violates the Constitution.

As for the Department of Defense, the agency originally in search of flight simulators, the only action they have taken is to cease awarding 8(a) contracts for simulators and related services, and won’t extend existing contracts through the program. The ruling does not impact other contracts, departments, or federal agencies. DynaLantic has issued a filing and asked the judge to amend his order and make it broader than just the flight simulator industry. “Merely articulating a strong basis in evidence for using the race-conscious Section 8(a) program in the simulation and training industry is not enough,” states a DynaLantic lawyer.

Minority-owned companies that do most of their business with the federal government are worried about the ruling and its impact on their business. Meanwhile, the Small Business Administration (SBA) seems to be optimistic about the future of 8(a). “The SBA is working with the Department of Justice and Department of Defense to review the decision and determine the appropriate next steps,” Emily Cain, a Small Business Administration spokeswoman, said in an e-mail.

Diversity organizations are speaking out against the ruling, including Javier Palomarez, President & CEO of the United States Hispanic Chamber of Commerce (USHCC). “Minority businesses already face discriminatory barriers in access to credit and capital, bonding, bid opportunities and business networks. This decision will serve as yet another barrier for minority business participation in government contracting. We will continue to work with our corporate partners, most of whom are strong supporters of the 8(a) program, to fight efforts by DynaLantic and companies like it to roll back a program that is improving the quality of the federal marketplace,” stated Mr. Palomarez.

It’s hard to say what impact this ruling will have in the long run; unlike appeals court rulings, the decision of a single federal judge isn’t binding on any other court. There is still the chance of an appeal, and it seems very unlikely that any other agencies will remove 8(a) from its contracting programs. What are your thoughts on this ruling? Do you think it will have a major impact on the 8(a) program and participating businesses?


Source: Minority Vendors Say Awards Program at Risk on U.S. Court Ruling via Bloomberg News

Source: National Minority Organizations Respond to Federal Court DynaLantic Corp. Decision via Red Orbit






 
 

 
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