Lawsuit Challenges Infrastructure Investment and Jobs Act Preference for Disadvantaged Public Contractors |  Schwabe, Williamson and WyattPC

Lawsuit Challenges Infrastructure Investment and Jobs Act Preference for Disadvantaged Public Contractors | Schwabe, Williamson and WyattPC

In an effort to counter the economic damage caused by the COVID-19 pandemic, Congress passed the Infrastructure Investment and Jobs Act in November 2021. Part of this bill set aside $370 billion dollars to improve and expand transportation, and further allocated 10% of it. funds for socially and economically disadvantaged public contractors. Incorporating the terms of the Small Business Act, the Infrastructure Investment and Jobs Act defines such socially and economically disadvantaged people as those who have experienced racial, ethnic, or gender bias within American society because of their membership in a particular group, including federally recognized Indians. Alaska Native Tribes and Societies (“ANC”). A new lawsuit filed in the United States District Court for the Intermediate District of Florida on July 13, 2022 alleges that this 10% allocation constitutes unconstitutional discrimination based on race and gender, violating the right to equal protection. under the Due Process Clause of the Fifth Amendment.

According to her complaint, the plaintiff, Christian Bruckner, is a white immigrant and a disabled business owner. Without alleging that he has actually bid on government contracts under the Infrastructure Investment and Jobs Act 10% earmarking, he claims that he cannot compete for them on a equal footing because he is not a socially and economically disadvantaged person within the meaning of the definition of the law. In particular, he points to the regulations implementing the Small Business Act at 13 CFR 124.03(b)(1), which establishes a rebuttable presumption that members of five specified racial or ethnic groups, and Indian tribes, are “socially disadvantaged”.

His complaint asks the Florida Federal District Court to “remove[e] all unconstitutional classifications based on race and gender in . . . the Infrastructure Act” and prohibit the federal government from applying these classifications in the administration of the Act. In support, he argues that these classifications cannot survive rigorous scrutiny.

Mr. Bruckner’s lawsuit is similar to previous challenges to the Small Business Act’s preference for socially disadvantaged public contractors. In 2016, in Rothe Development, Inc. c. Department of Defense, the United States Court of Appeals for the DC Circuit upheld the constitutionality of the Small Business Administration’s (“SBA”) 8(a) program against challenges that it violated racially-based equal protection . The plaintiff in this case was a small defense contractor. Like Mr. Bruckner, he argued that he could not compete fairly with minority-owned businesses and argued that the Small Business Act had not been subject to rigorous scrutiny because the government lacked evidence to demonstrate past discrimination against minority-owned businesses.

The DC Circuit disagreed, both that strict screening applied and that the Small Business Act discriminated based on race. Rather than favoring members of a particular race, the DC Circuit found that the Small Business Act defined socially and economically disadvantaged individuals as those who had personally experienced racial discrimination because of their group membership, without assuming that any individual would qualify based on their racial identity alone. Such a nuanced definition, the Court held, was racially neutral. Applying the less stringent “rational basis” test, the DC Circuit upheld the Small Business Act classification because it was rationally connected to the legitimate objective of remedying the effect of past harm in public procurement. Nevertheless, the Court noted in dictation that the regulations under the Small Business Act might not survive the same analysis.

Contrary to the claims of Rothe, who only addressed the text of the SBA itself, Mr. Bruckner specifically attacks the SBA’s implementing regulations and their presumption that members of five specified racial groups are socially and economically disadvantaged. As such, reviewing tribunals may apply a strict review analysis to SBA settlements. Given the composition of the federal bench after the Trump administration, it is unclear whether Mr. Bruckner will suffer the same defeat that the plaintiff suffered in the Rothe Case.

Along with other historically marginalized government contractors, Indian tribes and Alaska Native societies may wish to follow Mr. Bruckner’s case as it evolves. An unfavorable decision in the Shield cases, while technically only applying to contracts set aside under the Infrastructure Investment and Jobs Act, could have a collateral impact on SBA Small Business Program regulations, including the SBA’s 8(a) program and 8(a) set-aside procurement opportunities.

According to current precedent from the United States Supreme Court, preference for tribal members and businesses is based on political rather than racial classification. Similarly, the Alaska Native Corporations are a special creation of the Alaska Native Claims Settlement Act, and that act, rather than the SBA regulations, defines the ANC as “a minority business enterprise and economically disadvantaged.[s]for the purposes of Contract 8(a). As such, courts considering Mr. Bruckner’s case may reject any attempts to impose preferences on Alaska Native tribes and societies. But if his case makes it to the U.S. Supreme Court, which has shown itself willing to shake up past wrongs, the outcome could differ and could have a significant impact on the 8(a) program and the regulation of small businesses in the SBA.

Scroll to Top