For decades the Federal Government has provided a nine-year Small Business Administration (SBA) 8(a) Business Development Program to assist socially and economically disadvantaged entrepreneurs access to the Federal marketplace. The 8(a) program allowed for disadvantaged businesses that qualify a specific set-aside to seek out government sole source contracts under $7 million for manufacturing requirements and $4.5 million for goods and services.
Small, disadvantaged businesses looking to take advantage of this program and gain access to requirements in the Federal marketplace through 8(a) direct awards should be aware that the SBA has temporarily suspended new 8(a) application submissions while it revises the application process and questionnaire to comply with recent court decisions.
Revisions to the Application Process
A series of recent landmark decisions, starting with the Supreme Court’s ruling in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College on the limitations race and ethnicity, may play in college admissions. The court held that race-based affirmative action programs in college admissions processes violate the Equal Protection Clause of the Fourteenth Amendment. Following that groundbreaking decision, a Federal district court in the Eastern District of Tennessee on July 19, 2023 applied the Supreme Court’s reasoning to SBA’s 8(a) Program when reviewing Ultima Servs. Corp. v. U.S. Dep’t. of Agric.
This decision led to an “all stop” at the SBA while they address certain qualifications in the application process of the program to adhere to what Congress granted the SBA through the Small Business Act, which was to qualify certain groups in the 8(a) program that “have suffered the effects of discriminatory practices or similar invidious circumstances over which they have no control” and “it is in the national interest to expeditiously ameliorate the conditions” of these groups.
As noted above regarding the Supreme Court decision, the same application was applied to how SBA approves applicants for the 8(a) program. The court determined that the SBA has failed to remedy the effects of past racial discrimination in federal contracting by not requiring federal agencies to have goals for the 8(a) program. The SBA does not scrutinize whether a racial group is underrepresented in an industry or federal contracting in the program, resulting in the suspension of current applications
The courts have recommended the following changes to the program and application process:
- Evidence of past discrimination
- National reports of disparities on various industries in relation to specific discrimination and how exclusion from the program affects small/disadvantaged businesses
- Past discrimination where the government was “passive participant” in any industry
In addition, the SBA has reacted to the courts’ ruling by requiring current participants admitted to the program under rebuttable presumption to demonstrate in a social disadvantage narrative how the chronic and substantial social disadvantage that the 8(a) participant has encountered (such as, race, ethnic origin, gender, physical handicap) has negatively affected the individual’s entry into a certain industry or marketplace. The discrimination must have occurred in America, and can also be applied to education, employment and historic business practices. SBA will not require proof, but now will require the 8(a) participant to support claimed discrimination that occurred in the past or that still exists.
Going forward, there will be changes and probably more effort on the SBA’s behalf to meet the authority granted by Congress. The SBA will weigh the courts’ decisions regarding the program’s applications and approval process. They will make the necessary changes and still have a program that benefits agencies. However, for those that are now waiting, be prepared for additional requirements and justification that may be necessary to meet the new criteria presented by the courts, leading to a longer processing time.
The SBA has not communicated when they plan to reopen and process existing applications. This will continue until the agency demonstrates to the courts that the manner in which acceptance into the program satisfies the concerns noted above. This will most likely take several months for the SBA to resolve. We advise current 8(a) applicants to concentrate on demonstrating the effects of discrimination in their social disadvantage narrative and anticipate more requirements as this suspension develops.
If you have any questions specific to your situation, Cherry Bekaert’s GovCon Consultants are available to discuss your situation with you.
