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Dynalantic v. Department
of Defense Federal set-aside program at stake
In a case that could sharply limit the federal government's use of racial preferences for minority contractors, CIR is representing a small Long Island company whose ability to compete (and even stay in business) continues to be hobbled by the federal government's extensive use of race preferences in awarding government contracts. The company, Dynalantic Corporation, is owned and operated by Paul Patin and Jeff Weinstock and manufactures the simulators and training devices used to help train our nation's military personnel. Dynalantic's lawsuit against the Department of Defense (DOD) — and co-defendants the Navy and Small Business Administration (SBA) — is currently before U.S. District Court Judge Emmet Sullivan in Washington, DC. In a summary judgment motion filed in October 2003, Dynalantic asked Judge Sullivan to 1) declare that DOD's program of contracting preferences for minority-owned businesses violates the Constitution's equal protection guarantee, and 2) to enjoin those preferences. The government filed a summary judgment motion as well.
Judge Sullivan heard oral argument on the cross motions for summary judgment in August, 2004. In December 2004, the court invited several third party groups, including the NAACP Legal Defense Fund, Inc., Mountain States Legal Foundation and Pacific Legal Foundation to file amicus briefs on the various issues raised in the case. CIR responded to these briefs in April, 2005. The parties now are awaiting Judge Sullivan's decision.
A facade of social and economic disadvantage
The complex, mechanical preferences used by DOD include quota-like goals, set-asides, noncompetitive contract awards, a ten percent price adjustment factor, and performance evaluation incentives for contracting officers. These preferences, codified in Section 8(a) of the Small Business Act as well as in related statutes and regulations, are said to be for small, "socially disadvantaged" business owners of all races. However, the government defines social disadvantage so as to presumptively include virtually all racial minorities, ranging from African-Americans and Hispanics to Samoans, Tongans, Pakistanis, and Sri Lankans.
At the same time, the statutory and regulatory definitions presumptively exclude small businesses owners who are white, such as Jeff and Paul. As a result, "over 99% of the firms [in the 8(a) program] qualified as a result of race-based presumptions," according to a 1997 opinion by the U.S. Court of Appeals for the D.C. Circuit in an earlier round of this case. Data obtained by CIR show that nothing has changed since 1997: though styled as a benefit for "socially disadvantaged" businesses, the program is nothing more than a race preference.
In theory, the preference program is limited to "economically disadvantaged" individuals — those with net worth of no more than $750,000. In practice, the beneficiaries include many millionaire minority business owners. Dynalantic's summary judgment brief cites testimony by Karen Lee, Deputy Inspector General of the SBA, that "wealthy individuals continued to be eligible for the 8(a) program because the equity in their companies and primary residences and the net worth of their spouses were not considered.
A strong case
While the Constitution permits the government to use narrowly tailored race-base remedies where it has a compelling interest in eliminating the effects of its own past discrimination, neither the compelling interest nor narrow tailoring requirements are met in the 8(a) program. To the contrary, as Dynalantic's summary judgment brief explains, "the programs in question [require government agencies] to set aside a percentage of their procurements based primarily on race, without considering whether any discrimination ever existed, [or] whether there are continuing effects of that discrimination."
Despite nearly five years of discovery, the government has failed to offer evidence of any kind to suggest that there has been discrimination against minorities in the simulator and training industry, much less that it was government's own discrimination. Moreover, while DOD's preference program is supposedly targeted at industries where minority contractors are underrepresented, the government never bothered to determine whether there was underrepresentation in Dynalantic's industry. DOD offers as a justification for its racial preferences general allegations of discrimination in the business world, paired with the implication that, since the federal government does business throughout the nation, it must be "passively participating" in other people's discrimination. As Dynalantic's summary judgment brief explains, "Defendants hope to use the 'exception' of passive participation to swallow the rule against preferences based on societal discrimination." The ramifications of this case reach beyond contracting. At stake is whether the government can justify race preferences solely on the basis of it's allegedly passive participation in the discrimination of others, as measured by general social patterns of inequality.
Moreover, DOD's preference program fails to comply with the constitutional requirement that it be "narrowly tailored" to past discrimination. Among other things, the the government must seriously consider race-neutral alternatives to preferences, and it must limit racial preferences in time. See CIR's University of Michigan cases. But neither requirement is met by the 8(a) program. In fact, none of the many racial and ethnic groups granted disadvantaged status under the 8(a) program has ever been removed from the list of preference recipients, despite many years of social and economic progress.
An exhaustive factual record CIR has ensured that Dynalantic will be an exceptionally strong challenge to government contracting preferences. It has developed an extensive factual record based on over several years of court discovery, Freedom of Information requests, and other research. CIR's began work on a comprehensive legal challenge in 1997, when the U.S. Court of Appeals for the D.C. Circuit cleared the way for a broad examination of the 8(a) program. Read the D.C. Circuit's 1997 opinion.
CIR used its research in the Dynalantic case as the basis for its amicus brief in Adarand Constructors v. Mineta, an earlier and well-known challenge to federal contracting preferences. Read CIR's amicus brief and the press release describing it.
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 Last
revised:
23-Jul-2013
 
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