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NEUMA CORP. v. ABDNOR

April 4, 1989

NEUMA CORPORATION, Plaintiff,
v.
JAMES ABDNOR, Administrator, Small Business Administration, Defendant


Joyce Hens Green, United States District Judge.


The opinion of the court was delivered by: GREEN

JOYCE HENS GREEN, UNITED STATES DISTRICT JUDGE.

 In this action, plaintiff Neuma Corporation seeks judicial review of a ruling by the Small Business Administration (SBA) that Neuma was not eligible for participation in an SBA program for emerging minority businesses. For the reasons outlined below, the Court finds no error in the SBA's decision and will enter summary judgment in favor of defendant.

 I. The Statutory and Regulatory Background

 Section 8(a) of the Small Business Act of 1958, 15 U.S.C. § 637(a), established a special program designed to benefit "socially and economically disadvantaged" small business concerns. The Act authorizes SBA to enter into procurement and construction contracts with any federal agency. The SBA then subcontracts with qualifying small businesses, which actually provide services directly to the procuring agency. Id. § 637(a) (1). The goal of the 8(a) program is, as this Court has noted, "to increase the level of business ownership by minorities so that they have a better opportunity to become an integral part of the free enterprise system." Systems and Applied Sciences Corp. v. Sanders, 544 F. Supp. 576, 577 (D.D.C. 1982).

 In addition to demonstrating that it is socially and economically disadvantaged, 15 U.S.C. § 637(a) (4) & (5), a small business seeking eligibility in the 8(a) program must show that its business meets minimum competence levels. The Act provides:

 
No small business concern shall be deemed eligible for any assistance pursuant to this subsection unless the Administration determines that with contract, financial, technical, and management support the small business concern will be able to perform contracts which may be awarded to such concern . . . and has reasonable prospects for success in competing in the private sector.

 Id. § 637(a) (7). Although the SBA's regulations do not elaborate on the statutory language, see 13 C.F.R. § 124.107, additional guidance is provided in the agency's Standard Operating Procedure (SOP) 80-05. *fn1" In discussing the "reasonable prospects for success" standard, it states:

 
(a) The disadvantaged individual(s) upon whom eligibility is based must demonstrate adequate business experience, abilities, and/or educational background directly related to the applicant concern's business activity.
 
(b) A determination shall be made that the individual(s) upon whom eligibility is based currently has demonstrated management skills sufficient to manage the applicant concern.
 
(c) A determination shall be made that an applicant concern's existence as a business entity is not contingent upon acceptance into the 8(a) program.

 SOP 80-05 at 55-56. The SBA also requires that applicants be in business for two years prior to entry into the program:

 
Generally, in order to be considered to possess the requisite "potential for success" needed to be eligible to participate in the section 8(a) program, an applicant concern must have been in business for two full years as evidenced by income tax returns.

 Id. at 56. This requirement is not inflexible; an exception to the rule provides:

 
However, in extraordinary circumstances, an applicant concern which has not been in business for two full years may be eligible to participate in the 8(a) program, provided that the regional administrator determines that the individual(s) upon whom eligibility is based has (have) outstanding business experience and ...

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