Set-Asides Face More Trials

More and more companies are taking the 8(a) program to court -- but the Justice Department has yet to show how it plans to defend the program

P> The government's beleaguered 8(a) program faces more post-Adarand lawsuits by aggrieved companies -- and the Justice Department has yet to show how it will defend the $4.8 billion program from legal emasculation.

The new anti-8(a) lawsuits include a case lodged by Dynatlantic Corp., Deer Park, N.Y. "We're doing this because increasingly over the last few years... we've been unable to bid [for contracts] in our area of business" that have been set-aside for minority contractors, said Jeffrey Weinstock, a vice president at Dynatlantic.

If Dynatlantic -- or any of the other companies -- win their cases, government officials may be forced to drastically scale back the $4.8 billion 8(a) program of set-asides for minority-owned businesses. The program is intended to foster the growth of minority-owned businesses and has wide support among Democrat politicians and minority business executives.

The cases are based on the Supreme Court's decision last June in Adarand Constructors Inc. vs. Pena and have been lodged against the Washington-based Small Business Administration, which oversees the program. The other cases have been brought by SRS Technologies, Newport Beach, Calif.; McCrossan Construction Co. Inc.; and Converse Construction Co., based in Massachusetts

The Adarand decision directed the government to undertake affirmative-action programs only when there was no alternative to solve an important case of existing racial discrimination.

According to court documents filed by Dynatlantic, the Pentagon and the SBA should not set aside the contract because they "cannot show there is strong... evidence of past discrimination by the Navy in the military simulator manufacturing industry that would justify a racial preference. Nor can defendants show that use of a racial preference for this procurement is narrowly tailored to remedy any past discrimination. Therefore, if not [halted], defendants will violate Dynatlantic's equal protection rights" under the Fifth Amendment of the Constitution.

The 8(a) defense strategy adopted by Justice Department lawyers is unclear, said one participant in the case. Government lawyers "have been very secretive," he complained.

"They haven't figured it out, or else they are not telling us," said Babielyn Trabbic, president of The Presidio Corp., a Lanham, Md-based 8(a) company. Trabbic is also chairman of the National Federation of 8(a) Companies, based in The Centech Group Inc., Arlington, Va.

Richard Ugelow, the lawyer in the Justice Department's civil rights division responsible for defending the 8(a) program, declined to comment on the case.

Government officials may delay this case in the hope of winning some other anti-8(a) lawsuit -- cementing its case in all other 8(a)-related court cases, he said. McCrossan Construction Company Inc., has filed a lawsuit saying the set-aside of a $15 million federal contract at White Sands Missile Range, N.M., for minority-owned companies was barred by the Adarand decision.

Already, the government has fended off at least one anti-8(a) lawsuit. Science Applications International Corp., San Diego, dropped its case following protests by minority business contractors. Also, government officials are preparing an overhaul of the 8(a) program to better match the requirements laid down in Adarand, say industry officials.

Once in court, Justice Department lawyers -- led by Deval Patrick, the head of the department's civil rights division -- may ask the judge to defer to past decisions made by a Democrat-controlled Congress, said the participant in the case.

Judge Emmet Sullivan at the United States District Court in Washington has directed the government to show why the contract should not be halted. The government's arguments are to be submitted by Jan. 22, prior to a March 1 hearing.

The disputed contract is for delivery of two devices needed to train U.S. Navy helicopter crews. Dynatlantic already won a contract to upgrade similar training devices for U.S. Army helicopters. Last year, Navy officials at the Naval Air Warfare Center's Training Systems Division, Orlando, Fla., set aside the contract for a competition among 8(a) companies.

Dynatlantic employs 45 people and earned $6.5 million in 1995 building military training gear. It is too small to bid for large contracts, and so it pursues contracts worth less than $10 million, said Weinstock. But "almost all of those jobs have been set aside for minority firms," he said.

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