Racial set-asides deny veteran’s equal treatment and opportunity in federal contracting

The roots of Marty Hierholzer’s patriotism are deep. His father served for 26 years in the U.S. Navy—he was at Pearl Harbor during the World War II attack. Marty joined the Navy right out of high school and became a Navy deep-sea diver. He retired in 2002 after 22 years of service, with honors, the rank of Master Chief diver, and service-related disabilities.

While Marty’s active military service had come to an end, the love for his country had not. Nor had his loyalty toward his fellow veterans and wounded warriors. So he set out on a new, but related, mission: to serve those who still serve. He spent four years selling diving supplies for a government defense contractor. Then, in 2006, Marty started MJL Enterprises, a small business with 20 employees that contracts with federal agencies to provide maintenance products and equipment to VA hospitals and military facilities.

Marty hoped to tap into a Veterans Administration program to help disabled veteran-owned small businesses like MJL get off the ground. When that program failed to provide the promised service, Marty turned to the Small Business Administration (SBA). As a 22-year veteran starting a new company, he believed MJL should qualify for the SBA’s 8(a) program that sets aside federal contracts for economically and socially disadvantaged small businesses.

Unfortunately for Marty, the Small Business Administration doesn’t believe MJL is economically and socially disadvantaged—despite Marty’s long service to our country. The statutory scheme is complicated, but, in essence, those who are in certain preferred racial groups—black and Hispanic, for example—are automatically considered disadvantaged. Those, like Marty, who don’t fall into those preferred racial groups, must individually prove to the SBA that their business is economically and socially disadvantaged.

Marty’s efforts to do that were in vain. The SBA rejected Marty’s application because he does not belong to their preferred races and the agency rejected the evidence that his 22-year career in the Navy placed his business at a competitive disadvantage. Undeterred, Marty applied again, even providing documentation of his service-related disabilities. He was denied at every turn. Even Marty’s appeals were denied.

If Marty had been a member of one of the minority groups granted special status by the agency, he would have been accepted into the program, even if he had faced no disabilities or disadvantages in building his business.

It’s not been easy, but Marty is proud of his business. He’s able to provide good jobs and benefits to his employees, some of whom are also service-disabled veterans. Acceptance into the 8(a) program would enable MJL to grow so he can do even more for his employees and their local community, and better serve those who are still serving.

MJL Enterprises also represents the very sort of opportunity protected by the Constitution and its equal protection guarantee that he defended during his years of military service. The SBA’s use of race as the decisive factor in determining whether a small business is disadvantaged violates this constitutional promise of equality before the law.

In addition to the problems with the law’s racial preferences, it also has structural problems in that it empowers the Small Business Administration to make decisions that only Congress has the power to make. The statute allows the agency to decide which racial groups are on the preferred list—and are automatically considered disadvantaged—and which individuals have to try to prove to bureaucrats that they are disadvantaged. Congress must make these kinds of decisions itself and can neither give agencies the power to create racial classifications, nor use them to set aside federal contracts for favored racial groups.

Marty simply wants the SBA to treat all applicants based on their individual experiences rather than their race. Represented at no charge by PLF, he is fighting back with a federal lawsuit, challenging the SBA’s discriminatory contracting program and the statute that empowered the SBA to make race-based judgment calls.