"SDB set-asides are unnecessary because those firms are receiving an increasing amount of federal contract dollars, SBA Administrator Hector Barreto told Congress.

Replying to a letter from the two senior members of the Senate Small Business Committee, Barreto also pointed to a pending legal challenge to SDB set-asides, saying, "This adds to the concerns of using set-asides for SDB awards." Committee Chairman John Kerry (D-MA) and ranking minority member Kit Bond (R-MO) had asked Barreto to consider whether the six-year moratorium on the setaside program should be lifted.

Barreto noted that non-8(a) SDBs received $ 9.4 billion in prime contracts in fiscal 2001, up from $ 4.8 billion in 1995. Counting 8(a) firms, which are also classified as SDBs, the 2001 total was $ 15.6 billion, compared to $ 12.5 billion in '95. The figures come from the Federal Procurement Data Center's annual reports.

The center reported that SDBs and 8(a) firms combined received 7.1% of federal contract dollars in 2001, exceeding the legally mandated goal of 5%.

Henry Wilfong Jr., president of the National Association of SDBs, said the Bush administration has fallen victim to "Adarand syndrome." The moratorium on setasides was imposed after the Supreme Court's 1995 decision in the Adarand case, which set new restrictions on affirmative action programs.

But Wilfong pointed out that the majority opinion in that case, by Justice Sandra Day O'Connor, specifically stated that the government could take action to remedy the effects of racial discrimination. The court said remedies must be "narrowly tailored" to achieve a "compelling interest."

The administration also cited the Adarand decision in delaying a new set-aside program for women-owned small businesses. An SBA spokesman said a study of the issue had failed to establish evidence of discrimination against women in contracting, as required by Adarand. The study will be redone. (SAA, 5/31)

Wilfong said he was "disappointed" by the administration's position. "That wasn't Hector Barreto expressing his personal feelings about the merits of SDB setasides," he said. "That was the administrator of SBA, expressing the position of this administration. And the driving forces were 0MB and the Justice Department. Hopefully, they can be convinced to take another look."

Wilfong added, "I am still convinced of the president's commitment. I'm a little worried about some of his advisers."

In the lawsuit Barreto mentioned, Rothe Development Corp. v. Department of Defense, a white-owned company in Texas is challenging an SDB set-aside program formerly used by the Defense Department. (SAA, 12/7/01)

The U.S. Court of Appeals for the Federal Circuit ordered a lower court to conduct additional fact-finding on the constitutionality of the program.

Although the Justice Department has asked a federal judge in San Antonio to dismiss the case, Rothe Development's attorney, David Barton, said he is preparing for a trial, probably in late summer.