On July 19, 2023, a federal judge in Tennessee ruled that the Small Business Administration’s use of a race-based presumption of social disadvantage in its 8(a) contracting program violates the Fifth Amendment’s equal protection guarantee, a decision that stemmed from a lawsuit by Ultima Services Corporation and prompted immediate changes to how the program determines eligibility.
A long-running federal program
Congress authorized the 8(a) Business Development program in 1978 under Section 8(a) of the Small Business Act, which itself dates to 1953. The program is designed to help small businesses owned by socially and economically disadvantaged individuals compete for federal work through set‑aside and sole‑source awards. To qualify, a firm generally must be at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged and meet financial thresholds, and participation is limited to nine years.
How the challenged presumption worked
Beginning in the 1980s, and by 1986, SBA used a “rebuttable presumption” that members of certain racial and ethnic groups were socially disadvantaged. Individuals in those designated groups did not have to submit personal evidence of social disadvantage at application, while applicants outside those groups were required to do so. The court noted that SBA had not formally revisited that approach in light of later Supreme Court precedent.
The Ultima case and the court’s findings
Ultima Services, a small business that had long performed administrative and technical support work for the Department of Agriculture’s Natural Resources Conservation Service, sued in March 2020 after the agency shifted work into the 8(a) program in 2018. In his July 19, 2023 opinion, U.S. District Judge Clifton L. Corker held that SBA’s use of the presumption did not meet strict‑scrutiny requirements: the government had not shown a compelling interest tied to specific, identified instances of past discrimination, and the policy was not narrowly tailored. Citing recent Supreme Court guidance, the judge wrote, “The Supreme Court has held that the government has a compelling interest in ‘remediating specific, identified instances of past discrimination that violated the Constitution or a statute.’” He enjoined SBA from using the presumption.
Among the issues the court identified: SBA relied on generalized statistics rather than industry‑ or agency‑specific evidence; the policy lacked a logical end point; and there was no formal process for third parties to challenge a claimant’s social‑disadvantage status. The opinion also observed that SBA’s designated‑group list excludes some communities (such as Arab Americans and Hasidic Jews) while including others (e.g., Subcontinent Asian Americans), underscoring concerns about over‑ and under‑inclusiveness.
What changed after the ruling
Following the injunction, SBA instructed many current 8(a) participants who had relied on the presumption to submit individual “social disadvantage narratives” to continue receiving new 8(a) contract awards. SBA reopened new applications on September 29, 2023 with updated forms that allow applicants to establish social disadvantage through a narrative rather than by presumption. Those changes remain in effect.
Subsequent developments and oversight
In 2025, Kelly Loeffler was confirmed as SBA Administrator. In June 2025, she ordered a full‑scale audit of the 8(a) program, citing concerns about fraud and abuse and pledging referrals to inspectors general and the Department of Justice. Separately, The Daily Wire reports that it filed a Freedom of Information Act request in July 2025 seeking data on approvals and rejections under the new narrative process; the outlet says the request had not been acknowledged four months later. SBA did not immediately respond publicly to that specific claim.
The bottom line
The 2023 ruling did not end the 8(a) program. It barred SBA from presuming social disadvantage based solely on membership in certain racial or ethnic groups. Since then, the agency has required individualized showings of social disadvantage, while federal courts and policymakers continue to scrutinize how the program is administered.
