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Don Mansfield

HUBZone Prefrences Unconstitutional, Too

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I've received a e-mail containing the SBA's interpretation of the Rothe decision. Apparently, they believe the only impact is on the HBCU/MI set-aside. Here's the message:

The Rothe decision enjoins DoD from continued use of 10 USC 2323 "Contract goal for small disadvantaged businesses and certain institutions of higher learning" and prevents DoD from applying SDB preferences for contract awards, including HBCU/MI set-asides. However, DoD suspended the use of SDB preferences several years ago, based on the application of the Santorum Amendment, where DoD achieved its SDB goals in the previous year. DoD did however, continue to set aside procurements for exclusive HBCU/MI participation; that has now ended.

Even though the decision references HUBZones, it does not prevent DOD from conducting HUBZone set-asides or applying the 10% Price Evaluation

Preference (PEA) in full and open competition. The court's decision ends DOD's use of 10 USC 2323, the SBA HUBZone program referenced in the decision is implemented through 15 USC 657a (Section 31 of the Small Business Act (15 USC 631 et seq. )) and is not affected by the decision.

Nor does the decision prevent the use of SBA's Sec. 8(a) Program, so named for Section 8(a) of the Small Business Act (15 USC 637(a)). Both programs are NOT implemented through 10 USC 2323.

In addition, the Government-wide SDB goal of 5% still applies to DOD, the only change is the vehicle that was enacted to help achieve that goal for

DoD has been stricken. Finally, the Court's decision does not prevent the Department of Defense from conducting small business acquisitions in

accordance with SBA's regulations, FAR Part 19 or the remaining Subparts of DFAR 219.

What do you think? Did they get it right?

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Don,

I first admit that I am not trained to read court decisions, and may be way off.

I believe the court intended to say that all programs that have any racial component can only be applied after there is a proof of specific harm from past discrimination, and that, for all 5 types of programs listed, while discrimination and harm had been proven in the past in limited circumstances, there is no current showing that the test of such adverse impact is still met.

I believe the court intended to say that, in particular, since the 8(a) program is a subset of SDB preferences, it is not permitted. The implications for HUBZone seemed more tenuous.

But the SBA response appears to me to be well-founded and supported. I believe that the SBA interpretation will prevail until it is overturned through further litigation or legislation.

.

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I've received a e-mail containing the SBA's interpretation of the Rothe decision. Apparently, they believe the only impact is on the HBCU/MI set-aside. Here's the message:

What do you think? Did they get it right?

Don, the SBA is probably right in regard to HUBZone set-asides. There is a statutory basis for that program that is distinct from the DoD requirements. Further, HUBZone procurements do not have a facial race based component or aspect. Thus, the strict scrutiny analysis applied in Rothe does not apply to such procurements.

As regards the 8(a) program, it would be subject to strict scrutiny. However, the arguments against its constituionality are significantly different from those made in Rothe. Specifically, there is no price adjustment factor for 8(a) contractors. Instead, none 8(a) contractors, including other SDBs, may be excluded from a procurement reserved for an 8(a) award. Therefore, the reasoning in Rothe is not applicable to the 8(a) program.

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Don,

why do you say "HUBZones, too ?"

What else has been ruled unconstitutional ?

brian,

10 USC 2323 was found to be unconstitutional. This statute was the basis for, among other things, the SDB price evaluation adjustment and HBCU/MI set-asides.

After the DoD memo came out, some of my Army and Navy students were being told by their activities that the Rothe decision meant the end of 8(a) and HUBZone preferences. However, after reading the SBA's interpretation and giving it some more thought, I don't think that's the case. However, I still have some unanswered questions. I plan on doing some more digging.

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Here's a question and answer from the Ask-A-Professor site that would lead one to believe the DoD memo applies to 8(a) also.

Can I use GPC for a service buy under $25k if it is off a GSA contract schedule holder?

Posted to Government-wide Purchasing Card on 4/1/2009 12:00:00 AM

The Scenario?

I have a requirement to have some furniture moved to another building. The price exceeds the micro-purchase limit but is not over $25k.

The Question?

Can I use a GSA schedule holder if I get 3 quotes? If not, may i issue a P.O. directly to an 8(a) contractor

--------------------------------------------------------------------------------

I recommend you read FAR 13.301 which addresses utilization of the Government Purchase Card in greater dollar amounts.

To answer your question on going directly to an 8a Firm, I recommend you read Memorandum for Secretaries of the Military Departments, Under Secretary of Defense, 10 Mar 2009, at https://acc.dau.mil/CommunityBrowser.aspx?id=275888.

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Here's a question and answer from the Ask-A-Professor site that would lead one to believe the DoD memo applies to 8(a) also.

Can I use GPC for a service buy under $25k if it is off a GSA contract schedule holder?

Posted to Government-wide Purchasing Card on 4/1/2009 12:00:00 AM

The Scenario?

I have a requirement to have some furniture moved to another building. The price exceeds the micro-purchase limit but is not over $25k.

The Question?

Can I use a GSA schedule holder if I get 3 quotes? If not, may i issue a P.O. directly to an 8(a) contractor

--------------------------------------------------------------------------------

I recommend you read FAR 13.301 which addresses utilization of the Government Purchase Card in greater dollar amounts.

To answer your question on going directly to an 8a Firm, I recommend you read Memorandum for Secretaries of the Military Departments, Under Secretary of Defense, 10 Mar 2009, at https://acc.dau.mil/CommunityBrowser.aspx?id=275888.

While a proper recommendation, the answer may be misleading unless you actually read the DoD memo. It states that actions that rely exclusively on 10 U.S.C. 2323 are to cease. It says nothing about actions that rely upon other statutory or regulatory authority. The 8(a) program is authorized by the Small Business Act which is contained in title 15 of the U.S. Code, and FAR 15.8. Therefore, similar lo the HUBZone program, the 8(a) program is still in effect for DoD as well as the rest of the executive branch.

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While a proper recommendation, the answer may be misleading unless you actually read the DoD memo. It states that actions that rely exclusively on 10 U.S.C. 2323 are to cease. It says nothing about actions that rely upon other statutory or regulatory authority. The 8(a) program is authorized by the Small Business Act which is contained in title 15 of the U.S. Code, and FAR 15.8. Therefore, similar lo the HUBZone program, the 8(a) program is still in effect for DoD as well as the rest of the executive branch.

It is quite an interesting read to read the court decision. While denying Rothe "injunctive relief", it still determines 10 USC 2323 unconstitutional. 10 USC 2323 containes the 5% mandated goal that serves as the basis for most of DoD's specific efforts, i.e. "if we don't meet the goal willingly, SBA will impose the 10% premium". The court decision specifically states:

As currently written, Congress expected that the five percent goal would apply to five distinct entities

(SOBs, historically Blackcolleges and universities, minority institutions, Hispanic-serving institutions,

and "qualified HUBZone small business concerns"). The Governrnent's request here would have the

Court direct the entire five percent goal to "qualified HUBZone small business conceros." It is far

from certain that this result is what Congress intended. In addition, this Court is obligated to follow

the Federal Circuit's Judgment and Mandate, and the Federal Circuit made no exclusions for

historically Black colleges and universities, minority institutions, Hispanic-serving institutions, or

"qualified HUBZlme small business concerns." ..... declaring that Section 1207 as enacted in 2006

(i.e., the Cuttent 10 U.S.C. ? 2323) is facially unconstitutional, and (3) enjoining application of the

current 10 U.S.C. ? 2323.

My read of the court decision is that we no longer have a mandated goal. If these aren't mandatory any more then as long as DoD doesn't specifically discriminate, it can award any percentage of these contracts. The court did leave the option for 10 USC 2323 to come back, but only if Congress has "a 'strong basis in evidence' ... that DOD (is) a passive participant in racial discrimination..."

This seems like a triumph for Civil Rights. It seems that several generations of work on equality has finally paid off. We all have equal opportunity to be poor (pesimist) while faced with a seemingly arbitrary soverign process. The only way I could really fault the court decision is that while seemingly solving the problem, it does not address the underlying programs, leaving the issue unresolved, "Is a preference for any spedific group a violation of the equal protection clause of the 14th Amendment?" or "only if DoD has a specific percentage."

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