The District Court for the District of Columbia enjoined the government from awarding procurements for military simulators under the Section 8(a) program because the program was unconstitutional on an "as-applied" basis with respect to the military simulation and training industry. A simulator manufacturer challenged the constitutionality of Section 8(a) of the Small Business Act (15 USC 637(a)(4)(A)), which permits the government to limit certain contract awards to socially and economically disadvantaged businesses. The manufacturer contended the program was unconstitutional on its face and as applied in the military simulation and training industry.
Holding the 8(a) program was subject to strict scrutiny to the extent it relied on race-conscious criteria, the court held the program was constitutional on its face. The manufacturer did not rebut the government's showing of a compelling interest in eliminating the roots of racial discrimination in federal contracting, there was a strong evidentiary basis for concluding remedial action was necessary, and the program was narrowly tailored. With respect to the as-applied challenge, however, the court rejected the government's contention it was not required to "tie evidence of discriminatory barriers to minority business formation and development to evidence of discrimination in any particular industry." In City of Richmond v. J.A. Croson Co. (488 US 469), the Supreme Court made clear the government must provide evidence eligible minorities in the relevant market were denied entry or access notwithstanding their eligibility. The court noted it was not required to take a party's definition of "industry" at face value, but here the government did not contest the manufacturer's definition of the industry.
Industry-Specific Evidence Lacking
More importantly, the government provided no evidence from which to infer the existence of discrimination in the military simulation and training industry. The government therefore failed to meet its burden of showing a compelling interest in remedying discrimination in the industry. The court granted a permanent injunction prohibiting the government from awarding contracts for military simulators under the 8(a) program without first articulating a strong basis in evidence for doing so because the deprivation of constitutional rights constituted irreparable harm, and the other factors favored injunctive relief. In response to the court's decision, the Department of Defense announced the immediate cessation of 8(a) contract awards, including extensions or the exercise of options, for military simulators or services in the military simulator industry ( http://www.acq.osd.mil/dpap/policy/policyvault/USA004988-12-DPAP.pdf). ( DynaLantic Corp. v. Dept. of Defense, DC DofC, 56 CCF ¶79,876)