A federal judge ordered the SBA to stop its racial discrimination—but the agency isn’t listening

December 14, 2023 | By ALISON SOMIN
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The Small Business Administration (SBA) is deliberately circumventing a nationwide injunction in Ultima Services Corp. v. Dept. of Agriculture—a case litigated by the Center for Individual Rights (CIR)—to stop racial preferences in the SBA’s 8(a) program, which makes “socially and economically disadvantaged” small business owners eligible for certain government contracts.

Pacific Legal Foundation also sued the SBA over the 8(a) program: We represent Marty Hierholzer, a disabled veteran who runs a small business and was rejected from the program. Our argument against the SBA’s racial preferences is simple:  Individuals should be treated as individuals and not on the basis of their membership in racial groups. The Constitution enshrines this moral principle into federal law, and the Supreme Court’s decisions make clear that it prohibits racial discrimination in federal contracting, except where necessary to remedy specific instances of past discrimination.

In Ultima, a federal judge enjoined the program for assuming that membership in certain racial categories qualified contractors as socially disadvantaged. How is the SBA getting around the ruling? By asking each of its minority contractors to write a narrative explaining how they are disadvantaged by coming from a racial minority group.

An email received by some 8(a) contractors suggests that SBA approval would be virtually automatic for contractors who mention coming from certain racial groups in their narratives. The narratives may be brief, and reviewers of these narratives have received  minimal training on how to assess them. This bare-bones process contrasts with the more-thorough four-step review of applications from non-minority contractors, who are aiming to qualify for the 8(a) program based on social or economic disadvantage that is not racial.

The SBA’s narrative requirement may have been inspired by a passage in Students for Fair Admissions v. Harvard, which struck down racial preferences in university admissions but allows universities to consider “an applicant’s discussion of how race has affected his or her life.” But SFFA also states that “universities may not simply establish through application essays or other means the regime that we hold unlawful today…. What cannot be done directly cannot be done indirectly.” If the SBA is essentially rubber-stamping narratives from 8(a) applicants who come from favored racial groups, then it is doing indirectly what it has been forbidden from doing directly.

CIR has filed motions, which are pending, asking the trial judge to stop this effort to circumvent his ruling. The outcome will have important implications for other areas of civil rights law. Post-SFFA, many colleges and universities have indicated that they intend to circumvent SFFA’s direct prohibition on admissions discrimination by using racial proxies.

Pre-SFFA precedent that allowed limited use of race in higher education never extended to K-12 schools. So selective middle and high schools that wanted to change their racial demographics used racial proxies to achieve that goal. Here at Pacific Legal Foundation, we represent the Coalition for TJ, a parent group challenging proxy discrimination at Thomas Jefferson High School, an elite magnet school in Alexandria, Virginia. The Coalition’s cert petition is pending at the Supreme Court. Three other PLF cases, involving K-12 proxy discrimination in Montgomery County, Maryland, Boston, and New York City, are also pending in lower courts.

In Students for Fair Admissions, Chief Justice John Roberts memorably wrote that “[e]nding race discrimination means ending all of it.” Ending all of it means ending both direct and proxy discrimination. Letting the SBA’s narrative requirement stand would send a message to schools intending to circumvent SFFA that such circumventions will be tolerated. But the Constitution does not tolerate such evasions. The court should reaffirm this core constitutional and moral principle and require the SBA to follow its ruling.