SBA pauses new 8(a) applications

The Small Business Administration has stopped accpeting new applications for the 8(a) small business program in the wake of a court decision that declared unconstitutional the “rebuttable presumption” process SBA used to certify many companies as small, disadvantaged businesses.

Rebuttable presumption means that companies were accepted into the program without showing proof that they were socially disadvantaged.

Ultima Services, a non-8(a) company, claimed their Fifth Amendment rights were violated when it was not allowed to recompete for a contract that was then sole-sourced to an 8(a) firm. A judge in the U.S. District Court for the Eastern District of Tennessee agreed and said that SBA could no longer use rebuttable presumption.

SBA has released updated guidance for 8(a) companies. If the company was certified by using rebuttable presumption, it needs file a “Social Disadvantaged Narrative.”

The narrative must include the identity or identities being used as the basis for social disadvantage. The narrative also must include descriptions of incidents in which bias or discrimination occurred.

The descriptions of incidents need to be specific and related to education, employment, or business history. Details include when (an exact date if available), where, who committed the discriminatory action, an explanation of the conduct, and why the conduct was likely motivated by bias or discrimination. Applicants also need to explain how the incident impacted their advancement in the business world.

Companies need to provide this information in order to continue in the 8(a) program.

Current applicants for the program can continue working with SBA on the applications, but more information may be required.

The narrative process already has been used by many 8(a) firms, and these companies are not required to do anything.

On the certify.sba.gov website, new applications are no longer being accepted so the agency can comply with the court’s decision. SBA said the suspension is temporary as it is reviewing the ruling with the Justice Department to determine next steps.

A few things to note:

• The judge in the case has set a hearing for Aug. 31 to review other remedies. This means things may change again.
• SBA is working on guidance for agencies to follow so they can continue awarding contracts to 8(a) firms. We are trying to get a copy of that guidance.
• The court’s ruling did not apply to 8(a) firms owned by Alaska Native Corporations or tribally-owned entities. It is business as usual for them.