Could DOJ's DEI memo change the 8(a) program?
Plus what AI got right about the HUBZone price preference and how SBA won't use LinkedIn for size protests
Shortly after a 2023 Supreme Court decision struck down racial preferences in college admissions, the SBA’s 8(a) Business Development program scrambled to comply with a related court order. Now, Attorney General Pam Bondi has issued a Justice Department memo on what federal funding recipients must do to avoid unlawful DEI. According to the memo, potentially unlawful “proxies” include the use of “Overcoming Obstacles” narratives.
Social-disadvantage narratives—which describe the applicant’s obstacles—were the solution that SBA implemented to keep the 8(a) program active. The narratives aren’t exactly “Overcoming Obstacles” narratives, but the DOJ memo could be read to extend to social-disadvantage narratives. Will SBA need to change the 8(a) program again?
The DOJ memo, if applied to SBA, leaves some room to continue accepting social-disadvantage narratives.1 The memo states that “Overcoming Obstacles” narratives are potentially unlawful if implemented in a way that “advantages” applicants who write about “experiences intrinsically tied to protected characteristics,” thus becoming a proxy for granting preference based on protected categories like race. Hypothetically, an organization that uses narratives could collect data on how the narrative is evaluated. That data could show that the process does not advantage applicants based on protected characteristics.
The AI-drafted HUBZone PEP protest had the right idea, but the wrong case
GAO lambasted a protester for using AI to draft its protest in BioneX, LLC. The protester, a HUBZone firm, argued that it should have received the HUBZone price evaluation preference of 10%. The Air Force responded that the price evaluation preference did not apply because the acquisition was overseas and because the solicitation did not include the FAR clause that alerts offerors to the price preference, 52.219-4.
GAO dismissed the case after finding that the protester had fabricated case citations and quotations. Clearly, the protester—who was not represented by counsel—had drafted its protest using AI.
But AI actually had the law right. The statute that provides for the HUBZone price evaluation preference, 15 USC 657a, requires that the preference be applied “in any case in which a contract is to be awarded on the basis of full and open competition.” There isn’t any exclusion for overseas contracts. And there is actually a case that says that the preference applies even where the agency omits the FAR clause. It’s Delaney Construction Corp. v. United States, 56 Fed. Cl. 470 (2003).
BioneX is an unfortunate decision for HUBZone firms. The HUBZone price evaluation preference is very rarely used, and a winning protest could have convinced agencies to use it more. But we’ll never know because of the AI hallucinations.
SBA won’t check the LinkedIn profile in your size protest
The recent SBA size appeal of C4CJV, LLC failed for several reasons. Most importantly, the protester was effectively challenging SBA’s approval of a mentor-protégé agreement. But you can’t do that through a size protest. (Instead, the most common route is to challenge the joint-venture agreement between the mentor and protégé.)
The appeal also highlights the extent to which SBA will conduct outside research when adjudicating a size protest. The protester had claimed that the protégé’s chief operating officer had been a vice president at the mentor, thus showing the firms’ coordination. The protester referred to the COO’s LinkedIn profile. But, when SBA checked the LinkedIn profile, it was only available to logged-in LinkedIn users. Apparently, SBA was unwilling to log in to its LinkedIn page for the protester. So SBA rejected that protest ground.
The lesson is, if you are going to base your allegations on LinkedIn, print out the profile. SBA won’t log in just for you.
Sam Le is a Virginia- and D.C.-licensed attorney. His website is www.samlelaw.com.
The memo was sent to “All Federal agencies,” but it is primarily directed at the activities of Federal grant recipients, such as educational institutions, state and local governments, and public and private employers.