The good news for 8(a) Program participants (and applicants) is that the United States District Court for the District of Columbia ruled earlier this month that the 8(a) program is constitutional as a whole. The bad news is that the same court found the 8(a) Program unconstitutional as applied to the plaintiff’s specific industry, military simulation and training.
For disadvantaged companies in the military simulation and training industry, the court’s decision in Dynalantic Corporation v. United States, No. 95-2301 (2012) is a major setback. Already, the DoD has apparently suspended 8(a) contract awards under the Simulation, Training and Instrumentation Acquisition Center in the wake of the court’s ruling. For 8(a) companies in other industries, the critical question now is what impact–if any–Dynalantic will have on 8(a) awards in other industries.
The Dynalantic case has been going on for a very long time, even by federal court standards. The case began in 1995, when Dyalantic Corporation filed suit challenging the Navy’s decision to issue an 8(a) set-aside for the development of a helicopter aircraft flight simulator. Although the initial procurement was cancelled, the case continued as a constitutional challenge to the 8(a) program as a whole, as well as a challenge to the 8(a) program as applied to Dynalantic’s industry.
The constitutional challenge came under the Due Process Clause of the Fifth Amendment. Dynalantic argued that the 8(a) program’s racial preferences are unconstitutional because there is no legitimate basis, from a constitutional standpoint, to classify 8(a) applicants by race. (The 8(a) program allows Caucasians and other non-minorities to participate, but subjects them to a different–and higher–standard of demonstrating social disadvantage. In contrast, certain minorities are presumed socially disadvantaged).
Years of discovery, motions and legal maneuvering ensued. On August 15, the court finally announced its ruling.
The court held that the 8(a) Program, as a whole, meets the high constitutional standard necessary to classify citizens by race, namely, that the program is narrowly tailored to achieve compelling government interests. The court noted that when Congress adopted the 8(a) Program, Congress had evidence that certain minority groups had difficulty winning government contracts. The court held that this evidence met the constitutional standard for the 8(a) program as a whole.
However, the court also found that the government had not presented evidence that minorities suffered discrimination in Dynalantic’s particular industry, military simulation and training. The court held that in order to show a compelling interest such that classification by race in the award of government contracts is appropriate, the government must have industry-specific evidence that discrimination has occurred. The court found that the government had not presented evidence of discrimination in the military simulation and training industry, rendering the 8(a) program unconstitutional “as applied” to that industry.
For now, the court’s decision that the 8(a) program, as a whole, is constitutional may lead to sighs of relief from 8(a) participants and applicants (other than those in the affected industry, of course). But will that relief be short-lived? It is unclear from the decision whether any other industries could be affected, but it is certainly possible that the government may not have evidence of discrimination in every other industry in which 8(a) set-asides are awarded. If that is the case, 8(a) set-asides in other industries may be safe for now, but could be vulnerable to challenges like Dynalantic’s down the road.