If you are a government contractor participating in the Small Business Administration’s 8(a) Business Development Program, there is a good chance you received an email this week about COVID-19 and the SBA’s 8(a) suspension authority. What is this authority and, more importantly, how would suspension impact your 8(a) status? In this post, we aim to provide some answers to frequently asked questions about these suspensions.
1 – What is the SBA’s suspension authority and how does it apply to COVID-19?
SBA’s suspension authority derives from 13 C.F.R. 124.305. Under this provision, the SBA may suspend an 8(a) participant’s “8(a) contract support and all other forms of 8(a) BD program assistance.” This includes an 8(a) participant’s eligibility for award of any 8(a) set-aside.
Usually, 8(a) suspension is a lead-up to termination from the 8(a) program, but there are a few other situations where the SBA can suspend 8(a) status. These include circumstances like the 8(a) participant’s owner being called up for military duty or federal appropriations lapsing while an 8(a) sole source award is pending. More to the point, suspension is possible where a “Participant has a principal place of business located in a federally declared disaster area and elects to suspend its participation in the 8(a) BD program for a period of up to one year from the date of the disaster declaration to allow the firm to recover from the disaster and take full advantage of the program.” This is the basis SBA would consider applying in light of COVID-19.
The disaster area suspension basis was added to the SBA’s regulations in 2016 (which we discussed here). Because disaster relief suspension basis is a relatively new addition, we at SmallGovCon have not run into a situation where it has been so widely discussed–until now.
2 – If I voluntarily agree to suspend my 8(a) status, can I get it back before a year is up? If yes, how will that work?
Yes, you “may request that the suspension be lifted prior to the end date of the original request.” Notably, you may request suspension for less than a year, but the suspension period is capped at one year.
The nuts and bolts of how you might actually get your status back, however, are a little less clear. In other, similar circumstances, including where 8(a) participation has been suspended because an 8(a) owner is called into active military duty or where appropriations have lapsed, the regulations require SBA to “immediately lift” that suspension upon request. While this may be how SBA would proceed here, the regulation does not provide a similarly spelled out process for disaster related suspensions. We don’t anticipate, however, that the reinstatement process will be too extensive.
In any case, SBA has confirmed that 8(a) participants voluntarily suspending their 8(a) status because of COVID-19 won’t “lose time” in their program term. Instead, “the suspension time will be added to the program term” after it is lifted.
3 – I’ve voluntarily suspended by 8(a) status- can I still be eligible for 8(a) set-aside awards?
Typical lawyer answer: it depends.
First and foremost, the SBA’s Notice of Suspension must include something like the following statement:
“Awards of competitive and noncompetitive 8(a) contracts . . . will not be made during the pendency of the suspension unless it is determined by the head of the relevant procuring agency or an authorized representative to be in the best interest of the Government to do so, and SBA adopts that determination.”
Thus, typically, 8(a) set-aside contracts cannot be awarded to suspended entities during the suspension period. However, the agency (as decided by someone at a high level) and SBA have the discretion to override this requirement if they find it to be “in the best interest of the Government to do so.”
Additionally, based on what we’ve heard from the SBA, if you have already submitted a bid on a competitive 8(a) set-aside solicitation and you voluntarily suspend your 8(a) status before award, you are still eligible to receive that award. But the same does not apply for bids or on-going negotiations for sole source awards. For sole source awards, you must be an active (not suspended) 8(a) participant at the date of award.
Bottom line: for the most part you can’t bid on 8(a) contracts while suspended, but there are some exceptions.
4 – What about 8(a) set-aside contracts I’m already performing on? Or new 8(a) set-aside awards or task orders under a MAC or IDIQ contract?
According to SBA’s Standard Operating Procedures for the 8(a) program, a suspended 8(a) “Participant must continue to perform any current 8(a) contracts including options and in-scope modifications.”
In addition, you may remain eligible for 8(a) set-aside awards or task orders under existing MAC or IDIQ contracts you received as 8(a) set-asides, but only if these awards/task orders are competitively procured. Similar to the discussion above, SBA’s interpretation is that suspended entities will not be eligible for any sole-source award or task order.
Because this is somewhat new territory for 8(a) companies, we encourage you to reach out to your Business Opportunity Specialist to discuss the details. And if you still have a few questions, feel free to call or email us, or take a peek at our other COVID-19 Contractors’ Toolkit posts.