GOVERNMENT CONTRACTS GROUP ENEWS – JULY 21, 2004
District Court Upholds Small Disadvantaged
Business Set-Aside Goal on Defense Procurements
A federal District Court in Rothe Development Corp. v. U.S. Department of Defense, et al., recently
concluded that the five percent set-aside goal and 10 percent price preferential for small disadvantaged
businesses (SDBs) on defense procurements do not violate the Constitution. This means the
Department of Defense (DoD) will be able to continue to rely on the Small Disadvantaged Business
program in its attempts to award more contracts to small business concerns.
In Rothe, a non-SDB contractor had its low bid on a solicitation for computer operations and
maintenance services increased by 10 percent for evaluation purposes. As a result, the contract was
awarded to the next low bidder, a small disadvantaged business. In responding to the non-SDB
contractor's bid protest, the District Court for the Western District of Texas determined that there was a
"compelling interest" for the SDB program goal, as reauthorized by Congress in 2003, and was
therefore constitutional.
Small disadvantaged businesses that are owned by economically and socially disadvantaged
individuals can participate in the SDB program by obtaining certification through the Small Business
Administration. DoD's five percent goal means that over $18 billion in contracts are to be awarded to
SDBs each year.
If you have any questions, please contact any attorney in the Preston Gates government
contracts group at www.prestongates.com.
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