Proposed Changes to SBA Regulations

On October 28, 2009 the Small Business Administration released several proposed rules focused on addressing concerns regarding the 8(a) Business Development program.  Several of the proposed changes will affect 8(a) businesses owned by Alaska Native Corporations (“ANC”).  Under the new regulations 8(a) businesses owned by ANC’s will be required to submit information to the SBA showing how its 8(a) participation has benefited Native members and/or the Native community.  This data includes information related to funding cultural programs, employment assistance, jobs, scholarships, internships, subsistence activities and other services to the affected community. 

Another area addressed in the proposed regulations is the use of joint ventures for sole source contracts.  Under the current regulations ANC’s are exempted from the competitive thresholds for 8(a) procurements.  This exemption permits joint ventures between a non-8(a) business and an 8(a) ANC business to obtain sole source contracts, provided that the joint venture performs at least 50 percent of the contract.  The new regulation would not change this exemption.  However, the non-8(a) business would not be permitted to act as a subcontractor to the joint venture on the procurement.

The SBA states that the purpose behind this proposed rule is to limit the amount of work performed on an 8(a) contract by a non-8(a) business.  Similarly, the SBA is proposing a rule that would require the 8(a) partner to a joint venture to perform at least 40 percent of the work performed by the joint venture on the contract.  This 40 percent rule would apply to all 8(a) contracts – not just sole source awards.  In order to ensure this rule is followed, the SBA has also proposed a rule that would require, at the completion of every 8(a) contract, the 8(a) partner to the joint venture submit a report to the SBA explaining how the performance of work requirements were met for the contract.

Many 8(a) joint ventures are mentor/protégé relationships between 8(a) businesses and larger companies.  The SBA has also proposed rules addressing concerns that the mentor/protégé program was being used to the benefit of the larger companies rather than the 8(a) business.  Most notably, the SBA is proposing a new rule that would create consequences for mentor companies that fail to provide the assistance promised in the mentor/protégé agreement.  These “consequences” range from stop work orders on current contracts to ineligibility for the mentor program to debarment from Federal contracting.

The SBA is considering several alternatives to the proposed rules and is expressly seeking guidance from the public.  Comments may be submitted at www.regulations.gov until December 28, 2009.