SBA Poised to Increase 8(a) Income and Net Worth Eligibility Standards

We recently discussed at length the SBA’s proposed rule to get rid of WOSB self-certification and revise some of the other WOSB certification rules. Well, it seems like SBA is crossing a lot of things off its to-do list, because in that same proposed rule, SBA also proposes to “to make the economic disadvantage requirements for the 8(a) BD program consistent to the economic disadvantage requirements for women-owned firms seeking EDWOSB status” and to “eliminate the distinction in the 8(a) BD program for initial entry into and continued eligibility for the program.”

If the rule is approved, the dollar amounts for initial 8(a) economic disadvantage eligibility would increase quite a bit, making more people economically eligible. Read on for the details on this proposed change.

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DoD Proposes Aligning DFARS 8(a) Nonmanufacturer Rule with Existing SBA Regulations

The DoD recently issued proposed revisions to the DFARS 8(a) nonmanufacturer rule, found in 48 C.F.R. § 252.219-7010. The proposed revisions would update the admittedly “outdated text regarding the nonmanufacturer rule with updated text” that reflects SBA’s May 2016 final rule implementing the Fiscal Year 2013 National Defense Authorization Act.

While the changes are only for 8(a) concerns, the differences between the existing DFARS and proposed change are significant nonetheless.

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Section 809 Panel Recommends Changing “Once 8(a), Always 8(a)” Rule

Under the so-called “once 8(a), always 8(a)” rule set forth in the FAR and SBA regulations, when a procurement has been accepted by the SBA for inclusion in the 8(a) Program, any follow-on contract generally must remain in the 8(a) Program, unless the SBA agrees to release it for non-8(a) competition.

Now, the Section 809 Panel has proposed a modest, but potentially important change to the “once 8(a), always 8(a)” rule–a change that would allow for acquisitions to be removed from the 8(a) Program without the SBA’s explicit consent.

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Why Does the 8(a) Program Penalize Older Business Owners?

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).

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SBA OIG Recommends Improved Oversight of 8(a) Continuing Eligibility

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.

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GAO Faults Contractor for General Manager’s Sickness

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.

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8(a) JV Agreement Denied: Participant Brought Only Its 8(a) Status to Relationship

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.

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