The women-owned small business program dodged a Constitutional attack
Plus how OMB's consolidation memo uses SBA's playbook, the workaround for the vet program's licensing requirement, and more FAR-rewrite cuts affecting small business
Mark your calendars for a GovCon Intelligence live event on August 13th at 1 p.m. ET. We’ll be going live on YouTube to discuss the SBA’s 8(a) audits and regulatory developments.
Direct Constitutional attacks against the Federal government’s women-owned small business program have started, but the U.S. Small Business Administration won an early victory. After the Supreme Court’s Students for Fair Admissions decision in 2023, SBA’s 8(a) program was the first to suffer a loss in court for violating the Equal Protection clause of the U.S. Constitution. SBA quickly reformed the program to comply with the Tennessee court’s interim ruling in Ultima Services. More recently, an anti-affirmative-action litigant took aim at SBA’s WOSB program.
A magistrate judge for the Southern District of New York, however, recommended that Justin Samuels’s challenge to the WOSB program be dismissed. Samuels had argued that, after the Ultima decision, he could no longer receive contracting preferences available to minority business owners. And, because he is a man, Samuels would be denied access to preferences available through the WOSB program. But Samuels had not actually started a business, the judge found, so Samuels was not the right plaintiff to bring this claim.1
These sorts of threshold issues are simple for anti-affirmative-action groups to overcome—it’s easy to find an actual business owner to be the plaintiff in the next Constitutional challenge. And, hypothetically, what if a group is able to find a proper plaintiff and successfully challenge the WOSB program? After the Ultima decision, SBA was able to keep the 8(a) program operating by requiring that all applicants and participants submit narratives proving their social disadvantage. It’s hard to see how any similar strategy could work for the women-owned program.
OMB’s consolidation memo uses SBA’s playbook
Executive Order 14240, Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement, gave the Office of Management and Budget a very short 14 days to issue a memo to agencies on consolidation. It took OMB 120 days, and the memo that OMB issued last week doesn’t go as far as it could have. The Executive Order allowed OMB to transfer large governmentwide IT contracts, such as CIO-SP3 and NASA SEWP, to GSA’s management. But OMB didn’t do that.
Instead, OMB used the memo, M-25-31, to mandate that agencies “must” use existing governmentwide contracts—whether managed by GSA or not—to buy commercial products or services. Agencies would not be able to use a new contract unless the agency head provides an exception. The memo doesn’t mention whether the exception is delegable, so the actual details of this new requirement won’t be known until the FAR Council publishes its rewrite of FAR Part 8. Once agencies adopt the governmentwide-contract mandate, this mandate will supercharge the use of OMB’s Category Management program.
In issuing a mandate for governmentwide contracts, OMB is following the same playbook that SBA used to prioritize small businesses. First use goals, then propose mandates. This playbook was remarkably successful at SBA, with small-business contracting reaching a record 28.76% in 2024. The prior goals-based program for Category Management also was successful—agencies spent 13.6% of their 2024 dollars with best-in-class contracts (the most favored type in Category Management), far exceeding a 12% goal. Look for best-in-class usage to continue to soar upward under the new governmentwide-contract mandate.
The licensing workaround in SBA’s Vets program
The protester in Protest of Stripes Global LLC tried to rely on the SBA rule that the veteran owner must hold the company’s required licenses, unless an exception applies. The protester lost because that rule isn’t meant to apply at the contract level. Instead, as SBA noted in its recent HUBZone program changes, the licensure rule applies when the company operates in an industry that requires professional licenses, like engineering or—a frequent subject of SBA size decisions—dentistry. OHA denied the protest because the facts were different: the license at issue was one to distribute medical gases.
Had the veteran-owned firm needed professional licenses, it could have taken advantage of a straightforward workaround. The veteran just needs to supervise the license holder. SBA considers the veteran owner to control a business where the veteran has “ultimate managerial and supervisory control” over the licensee. That’s true even where the veteran doesn’t hold the required license.
The FAR rewrite removes more small-business protections
I’ve been keeping track of how many times the FAR rewrite removes small-business protections and replaces them with…well, nothing. Between FAR Part 10 (Market Research) and Part 18 (Emergency Acquisitions), the FAR rewrite deleted 20 small-business provisions, leaving zero. The deletions included rules on agencies working with SBA’s procurement center representatives and determining whether to use SBA’s set-aside programs.
The newly released rewrites of FAR Part 35 (Research and Development Contracting) and Part 36 (Construction and Architect-Engineer Contracts) continue these cuts. The existing Part 35 requires agencies to continually search for small businesses to perform R&D work, and to refer a nonresponsible small business to SBA under the Certificate of Competency process. The existing Part 36 had rules about publicizing contracts set aside for small businesses and specifying whether the contract is set-aside. In the rewrite, all of that small-business language is gone—five provisions in all, across the two parts.
Deleting this small-business-specific guidance isn’t good for small businesses: Agencies will skip over steps that previously were there to remind them to look at small businesses first, and to make the bidding process easier and more transparent. Now, the most that small businesses can hope for is that these important protections return in buying guides. Informal input in the newly released parts is due September 8.
A losing protest saved the government $21 million
GAO recently went to Capitol Hill for a hearing about whether contractors abuse the bid protest process. One of the more interesting exchanges had GW professor Christopher Yukins explaining that there are only about 500 lawyers working on Federal contracting, compared to 2,000 procurement lawyers in Hungary. The hearing came amid proposals by House lawmakers to slash GAO’s budget by almost $400 million.
But a recent protest should be cause to give GAO at least 5% of that money back. The VA initially awarded MerTel a contract for over $50 million for telephone services, but Granite Telecommunications LLC protested. Granite had bid just $33 million to perform the same services, and presumably it argued that it presented the better value. The VA decided to seek new proposals. The second time around, the awardee MerTel lowered its price by $21 million to $32 million, just barely undercutting its protesting competitor. The VA awarded the contract to MerTel, and GAO upheld the new award decision.
It’s not clear how MerTel discovered that $32 million was the right number to win the contract. Regardless, before the GAO protest, the VA was willing to contract with MerTel for $21 million more. Now, because of GAO, the VA will get the same services at a huge discount.
Sam Le is a Virginia- and D.C.-licensed government contracts attorney. His website is www.samlelaw.com.
