The 8(a) Program regulations will undergo some significant changes as part of the major final rule recently released by the SBA, and effective August 24, 2016.
Here at SmallGovCon, we’ve already covered big changes to the SDVOSB Program and HUBZone Program brought about by the new SBA rule. But the 8(a) program is affected by the new rule too, and important changes involving eligibility, the application process, sole source awards, NHOs, and more will kick in later this month.
The number of 8(a) sole source contracts over $20 million awarded by the DoD has been “steadily declining since 2011,” when a new requirement was adopted requiring agencies to prepare written justifications of such awards.
According to a recent GAO report, such awards have dropped more than 86% compared to the period before the justification requirement took effect. The report states that much of the work that was previously awarded on a sole source basis has now been competed.
SBA’s regulations provide that an 8(a) program participant that no longer is owned or controlled by socially and economically disadvantaged person can be terminated from the 8(a) program. But the decision to terminate is not one to be made lightly: SBA must make sure that it not only has evidence in support of its termination decision, it must also explain how that evidence demonstrates its conclusions.
This requirement was at issue in a recent court decision that found an SBA 8(a) program termination decision to be based on “numerous erroneous assumptions” and “unsupported conclusions, not substantial evidence.”
A brief email to Utah 8(a)s on May 5, which was forwarded to me by an industry connection, states “The Utah District Office hereby rescinds the e-mail dated April 21, 2016 regarding Mentor Protégé and Joint Venture relationships.”
No reason was given for the sudden change, but I think it’s the right call.
An 8(a) joint venture was unable to show that its mentor-protege agreement had been renewed by the SBA for a particular year–and the missing reauthorization caused the joint venture to be ineligible for a small business set-aside contract.
In a recent decision, the SBA’s Office of Hearings and Appeals held that an 8(a) joint venture could not avail itself of the mentor-protege exemption from affiliation when there was no evidence to show that the SBA had renewed the mentor-protege relationship for the year in which the joint venture’s proposal was submitted.
The SBA’s Utah District Office has imposed tough new restrictions on the approval of 8(a) mentor-protege agreements and joint ventures.
The Utah SBA obviously hopes that these restrictions will lead to more successful 8(a) mentor-protege and joint venture relationships–but I worry that these District-specific restrictions may backfire, and put Utah 8(a)s at a significant competitive disadvantage against 8(a)s serviced by other SBA District Offices.
Participation in the SBA’s 8(a) Program has declined from about 7,000 firms in 2010 to only around 4,500 today–a sharp drop of approximately 34% in only six years.
These startling numbers come from a recent SBA Office of Inspector General report, which focuses on whether the SBA properly documented the reasons for admitting certain 8(a) participants. While that matter is interesting in its own right, the most revealing part of the SBA OIG report is the rapid decline in 8(a) Program participation, and the SBA’s plans to reverse it.