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Oles Morrison

SBA Releases Final Rules Revising 8(a) Regulations

Tue Apr 5, 2011

On February 11, 2011, the Small Business Administration published in the Federal Register long awaited rules revising the current regulation of the 8(a) business development program.  These rules will become effective on March 14, 2011. 

The revised rules are aimed at increasing business opportunities for eligible small business concerns, while curbing the abuse that has plagued the program for many years and caused much criticism.

Major changes include:

  • An 8(a) firm in a joint venture must perform 40 percent of the work of each 8(a) joint venture contract that is awarded, including those awarded under a Mentor/Protégé agreement, to ensure that these companies are able to build capacity;
  • A joint venture awarded an 8(a) contract cannot subcontract work to a non-8(a) joint venture partner, including a large business mentor;
  • Each 8(a) firm that performs an 8(a) contract through a joint venture must report to SBA how the performance of work requirements (i.e., that the joint venture performed at least 50% of the work of the contract and that the 8(a) participant to the joint venture performed at least 40% of the work done by the joint venture) were met on the contract;
  • Mentor companies that fail to provide adequate assistance to their protégés now face consequences, ranging from stop-work orders to debarment;
  • Alaska Native Corporations, Native Hawaiian Organizations and Community Development Corporations must now report benefits flowing back to their respective communities;
  • Firms owned by a tribe, ANC, NHO or CDC may not receive a sole source 8(a) contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another participant (or former participant) owned by the same tribe/ANC/NHO/CDC.

The SBA published the proposed version of these rules on October 28, 2009, with a 60-day comment period ending in December 2009.  The SBA then extended the comment period into January 2010 .  Throughout 2010, the SBA also held several public meetings across the country to discuss the proposed changes.

These changes come after several years of criticism that the 8(a) program contained loopholes that allowed large businesses access to contracts set aside for small businesses.  Much of the criticism has been directed at Alaska Native Corporations, which operate within the 8(a) program and are permitted special exceptions to the 8(a) program requirements of social and economic disadvantage as well as the size affiliation rules.  In October and November 2010, the SBA suspended several firms from federal contract involved in abusing the 8(a) program regulations.

To view the complete final rules visit:

http://www.gpo.gov/fdsys/pkg/FR-2011-02-11/pdf/2011-2581.pdf