The Core Part Of This Federal Race-Based Contracting Program Is Illegal, Judge Says

A judge in 2021 ruled that a key part of the government’s multibillion-dollar minority contracting program was illegal, potentially giving the Trump administration inroads to kill the fraud-ridden program.

In 1953, Congress instructed the Small Business Administration to reserve some federal contracts for “disadvantaged” businesses. Beginning in 1986, SBA counted businesses owned by racial minorities as “presumptively” disadvantaged. That meant instead of an applicant having to show that he had actually faced discrimination, he simply needed to show his race. The result was the 8(a) program, a sprawling DEI enterprise that has impacted every aspect of government.

That continued even during the first Trump administration. In one case in 2018, the Department of Agriculture reserved work on a particular project for “disadvantaged” businesses, even though it internally acknowledged that doing so would cause an “adverse impact” on Ultima Services Corp, which had been doing similar work for the agency for years.

Ultima sued in March 2020, alleging anti-white discrimination, but the Trump administration fought it, filing a motion to dismiss in July 2020.

Documents unearthed through that lawsuit revealed that even though the government claimed being a racial minority merely provided a “rebuttable presumption” that someone had experienced discrimination that “could be overcome with credible evidence to the contrary,” it had no mechanism for someone to actually rebut it. That means even “nepo babies” and people who worked in industries where their race never experienced discrimination were put on the fast track to government contracts.

A “socially and economically disadvantaged small business” is one that is at least 51% owned by a disadvantaged person. So, soon people began forming 51-49 partnerships where one person’s role was essentially to be a racial minority so contracts could be awarded to the company with no competition, while the other provided the actual expertise and work.

That leads to increased prices, because the firms essentially have to pay a middleman’s fee. It also generates a worse work product, since the government isn’t seeking multiple bids and choosing the best.

James O’Keefe recently captured an executive from one such business admitting to being a “pass-through” that collected tens of millions of dollars by being a Native American-owned company that got government contracts and subcontracted the work to others, and SBA Administrator Kelly Loeffler said a full review of the 8(a) contracting program is underway.

Discovery in the Ultima lawsuit showed that SBA has never removed a group from “disadvantaged” status, making it a permanent reparations program instead of one that worked to offset past discrimination for a specific period of time.

It also revealed that SBA made no effort to determine whether specific minority groups had faced discrimination in specific industries. It simply assumed that all minority groups were disadvantaged in all fields — even giving Indians a leg up in computer science, a field in which they have been dramatically overrepresented for its entire history.

During the course of the lawsuit, SBA implemented a rule that said people would no longer be considered disadvantaged “if their net worth exceeds $850,000, their adjusted gross income exceeds $400,000, or their total assets exceed $6.5 million.” Ultima said those thresholds “only disqualify the richest individuals.”

The Biden administration continued fighting the lawsuit, while President Joe Biden increased the goal for minority “set-asides” from 5% of all federal contracts to 15%.

But in July 2023, Judge Clifton Corker, a Trump appointee in the Eastern District of Tennessee, ruled that assuming every minority was disadvantaged in every field was illegal, especially after Supreme Court precedent such as the 2023 Students for Fair Admissions case that ruled that affirmative action was illegal in colleges.

Biden’s excesses in flagrant racial favoritism led to court rulings that didn’t exist years prior, and included ruling against a program — also administered by the SBA — that prioritized minorities for coronavirus aid.

Corker wrote that “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.’” SBA never identified specific instances of racism that it was addressing, but merely provided nationwide statistics that showed minorities earning less money generally.

Ultima said the list of minorities given preference is essentially random, including Indian Americans, who out-earn whites, while excluding Arab Americans. Corker said SBA also “does not consider other groups, such as Hasidic Jews who have faced similarly appalling discrimination, eligible for the rebuttable presumption of social disadvantage.”

The government must identify “prior discrimination by the governmental unit involved” or “passive participation in a system of racial exclusion” before it “embark[ed] on an affirmative-action program,” Corker said, citing precedent.

SBA argued that “the presumption is flexible because it may be overcome with evidence that an individual is not socially disadvantaged,” but the judge said he “struggles to see how that process would work in practice,” with an SBA employee admitting “[t]here’s no process for a third party to question someone’s social disadvantage.”

Judge Corker said precedent requires that a race-conscious program “must be appropriately limited such that it will not last longer than the discriminatory effects it is designed to eliminate,” and have a “logical end point.” Seventy years after its advent, SBA conceded that “the 8(a) program has no termination date.”

“Defendants have failed to show that the use of the rebuttable presumption in the 8(a) program is narrowly tailored,” Judge Corker ruled. “Use of the rebuttable presumption violates Ultima’s Fifth Amendment right to equal protection of the law,” he said, enjoining the federal government from assuming that minorities are all disadvantaged.

That dealt a massive blow to the government’s multibillion-dollar DEI contracting regime.

In July 2024, the Biden SBA issued an advisory acknowledging that most 8(a) contracts had been awarded based on the applicant’s race, with no showing of actual discrimination. It said to receive new contracts under “disadvantaged” set-asides, firms would need to “submit a social disadvantage narrative,” meaning an essay demonstrating that they are a victim.

It said, “the examples you include in your social disadvantage narrative can be related to any time in your life but must include detail of how the incident impacted your entry or advancement in the business world.” Those whose essays pass muster “will receive a Social Disadvantage Qualification letter.”

But the Biden administration may have simply sidestepped the injunction, and it is not clear how things have changed in the second Trump administration.

In July 2025, The Daily Wire submitted a Freedom of Information Act request for statistics on whether any minorities were rejected based on their essays, as opposed to disregarding the judge’s ruling by rubber-stamping them. The Daily Wire also requested copies of the victimhood essays.

Despite legal requirements, the Trump administration has not even acknowledged the FOIA request four months later. It has not responded to numerous follow-up inquiries about how it is dealing with the 8(a) program in light of the Ultima ruling, and spokeswoman Caitlin O’Dea did not return multiple phone calls.

Related: USAID Official, Three Contractors Plead Guilty To Half-Billion Dollar Minority Contracting Scheme