The 8(a) Program can offer incredible opportunities: sole source contracts, set-aside competitions, mentor-protege relationships, SBA business training and much more.
But for business owners older than 59 1/2, getting admitted to the 8(a) Program can be very difficult: unlike their younger counterparts, funds these owners have saved in traditional retirement accounts will likely count against the 8(a) Program’s $250,000 adjusted net worth cap.
How is this fair? (Spoiler alert: in my opinion, it ain’t).
Last year, we wrote about the SBA’s Office of Inspector General’s concerns with the SBA’s review of potential 8(a) participants’ eligibility. In this report, the OIG made three recommendations aimed at improving to verify applicants’ eligibility.
Just last week, the OIG released a new report analyzing the 8(a) Program. This report picks up where the earlier report left off—it addressed several issues in the SBA’s evaluation of participants’ continuing eligibility.
The results of this report are rather alarming: based on its review, the OIG identified almost $127 million in 8(a) set-aside awards to ineligible firms.
When an incumbent contractor’s general manager got sick and had to quit, the contractor promptly found a replacement, which the agency approved. But there was still one problem: the incumbent had already proposed to use the same general manager for the next contract.
According to GAO, the agency was right to eliminate the contractor from the competition, even though the agency knew that the contractor had a new general manager and had, in fact, approved the replacement.
When companies seek to join forces under an 8(a) joint venture agreement, they often focus on meeting the SBA’s specific joint venture requirements. In doing so, however, they might overlook the threshold goal of an 8(a) joint venture: to allow an 8(a) to develop the necessary capacity to perform a contract.
As a recent Court of Federal Claims decision shows, overlooking this requirement can cause an 8(a) joint venture agreement to be rejected by SBA—and lead to the joint venture being found ineligible for an award.
The SBA is considering eliminating the requirement that contractors obtain the SBA’s prior approval to joint venture for 8(a) contracts.
There’s no doubt that eliminating the approval requirement would reduce burdens and expenses for 8(a) companies and their joint venture partners–but it could also lead to an uptick in sustained protests against 8(a) joint ventures.
An 8(a) joint venture agreement was ambiguous about whether the joint venturers intended to create a populated joint venture (which is no longer allowed) or an unpopulated joint venture–and the ambiguity cost the joint venture an 8(a) set-aside contract.
In a recent decision, the U.S. Court of Federal Claims upheld the SBA’s decision to reject a joint venture agreement that was ambiguous about whether the joint venture was populated or unpopulated.
The SBA’s regulations do not allow an 8(a) company to file a size protest challenging the award of an 8(a) sole source contract to a competitor.
In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that size protests relating to 8(a) sole source awards can be filed by contracting officers or the SBA itself–but not by competitors.